How to Have a Good Revenue Management System in Place?
If you are running a hotel business, proper financial analysis based on the rate of bookings and pricing strategies is important to help you maximize the earning potential of your business. And that is what is called a smart revenue management system in hotel business practices.
In technical terms, for the hotel business, revenue management is all about selling the right room to the right customer, at the right time, at the right price, and through the right channel. With the right strategies and software, you will have the ability to effectively use performance data to predict the demand rate and establish a dynamic pricing strategy to grow your revenue.
Revenue management is a crucial procedure for almost all industries. But it has a special weightage for the hospitality industry because of fixed costs, perishable inventory, and varying demand levels. And hoteliers like you need much more than guesswork to decide on the right cost of your rooms and complementary services.
If you are a new hotel business and are unaware of how to assess if you have a good revenue management system, then here are a few strategies to help you achieve it.
What is the Meaning of Good Revenue Management?
A good revenue management technique that uses analytics to predict customer behavior, optimize the availability of rooms, and optimize prices to generate maximum possible revenue. The key fundamental goal of hotel businesses is to increase revenue by selling the same number of rooms and services to customers.
Hence, to make that possible, matching the supply and demand is important. And smart revenue management system in hotel operations is what helps you achieve it.
For instance, if the demand for a room is high tomorrow, you might have to deny selling it today and sell it at a higher price the following day. It also means that you should sell the room at a discounted rate if you observe that the demand will be even lower tomorrow.
5 Best Revenue Management Strategies for Your Hotel Business
When you have established your business operations and integrated necessary software solutions to handle the distribution channels and direct bookings, it is time you step in and analyze your revenue flow.
For that, you need to ensure that your pricing on particular rooms and services is strategic and competitive with what others are offering. Along with that, proper revenue management will also help you determine the distribution channels that are profitable and the channels that are not converting for you at all.
Here are the best five revenue management strategies to ensure you have a smart revenue management system in hotel operations:
1. Customer Segmentation and Price Optimization
The first step to implementing a perfect revenue management strategy is segmenting the costumes. Hotel business has to deal with business travelers, sports travelers, vacation travelers, and backpacking travelers.
Once you have segmented them, you need to analyze the types of services they prefer and the facilities they use.
Depending on that, you can assess their behavior and run a price optimization procedure for all of those varying segments. Price optimization based on the segments will eventually help you minimize future rate changes.
Hence, customers will develop loyalty towards your brand as they might appreciate the price consistency you maintain.
2. Keep an Eye on the Competition
Have a team to keep an eye on the movements of your competitors in the hospitality industry. You need to make important decisions about pricing to ensure that your potential customers prefer you over the competitors.
Apart from that, competitive analysis helps you realize if you are holding up well in the same location, same price range, and with similar amenities.
When you find that your competitors are offering discounts and incentives on their room options, you can conclude that the demand is low at the moment. So, in that pursuit, you should follow up on it and adjust your rates accordingly.
If you use revenue management software, you will have a graphical analysis of the peak and drop of bookings throughout the year.
You can refer to those graphs and determine if these fluctuations are consistent. If there is some form of consistency, you can believe that the demand flow is down in those months. But, any form of inconsistency might indicate that your competitors are trying some marketing tricks to take away bookings from you.
3. Implement Forecasting Strategies
One of the most undeniable aspects of smart revenue management in hotel businesses is forecasting.
These forecasting strategies will help you predict future revenue and demand. As a result, you can make necessary amendments to meet those predictive demands.
You might have to use proper revenue management software to derive accurate data and records on occupancy, revenue, and room prices. Highly efficient and accurate forecasting depends on such intensive data. Historical data can help you spot the trends in your hotel business.
For instance, if you have noticed the vacation traveler count increasing in December every year, then possibly it will also be the same in the forthcoming year. You will be ready beforehand with the right offers and pricing deals to lure your potential guests. You might also need to acquire data on current bookings, local events, and competitor approaches for impactful forecasting.
4. Deploy the Pricing Strategies Quickly
Smart revenue management in hotel business is not just to forecast the need for changing the price of particular room types but also to bring it into immediate effect. A good revenue management strategy demands you to have software integrations of channel management and booking engine into your property management system (PMS).
The booking engine lets you update prices and inventory details on your direct booking channels, such as your website and mobile application. The channel manager helps you do the same for all online travel agencies (OTAs). After you set the pricing, these software solutions automatically update the inventory in real-time for OTAs and your direct channels.
When you have forecasted a hike or drop in demand, you can immediately update the prices of rooms and upsell service bundles through a channel manager or booking engine. You just have to update it once in your channel manager, which will be updated across all OTAs. Similarly, the booking engine will update the price across your direct booking channels.
5. Analyze the Performance of Distribution Channels
With proper revenue management software, you can analyze the performance of different distribution channels. Check how much profit you earn from the individual channels after deducting the commission they charge. You must observe what channels are not contributing to maximizing your revenue.
Invest the commission cut from profits only for the channels contributing well to your hotel business. End your integration with the distribution channels that don’t convert for your hotel business.
Your hotel business will lose out on profits if you are not investing your time and analysis efforts into revenue management. Promoting more direct bookings and extending your brand’s exposure to multiple distribution channels is good. But, without the right analysis on revenue terms, your growth scale will always take a downward dip compared to your competitors.
AxisRooms enables you with a perfect revenue management system as a tool and service. Take the help of analytic features in the software and talk to professional consultants to get guidance on improving and amending your operational strategies.
Check out the website to learn more about its efficacy for your hotel business.