What is revenue management?
The right room, for the right guest, at the right time and price, through the right channel. What revenue management means for a hotel, and the four parts it rests on.
Revenue management is often summed up as selling the right room to the right guest, at the right time, for the right price, through the right channel and at the lowest cost. It sounds like a slogan, but every part of that sentence is a decision a hotel makes every day.
In practice, it means using data to understand and predict how guests behave, then adjusting price and availability to earn as much as possible from the rooms you have. It also shows you when demand will be weak, so you know when a lower price makes sense.
The same rooms, more revenue
A hotel cannot add rooms for a busy weekend. Revenue management is about earning more from the same number of rooms by matching supply to demand, and that starts with understanding how guests see value.
Sometimes it means not selling a room cheaply today because you expect to sell it for more tomorrow. Sometimes it means accepting that demand is low and pricing to fill the room. Done well, it also shows you where staffing is out of step with demand: too many people on shift in quiet weeks, or too few in the busiest ones.
The four parts
Revenue management is one of the most useful tools a hotel manager has, and it rests on four parts.
- Customer segmentation. Group guests by what shapes their booking: their age, the purpose of the trip, how they spend and what interests them. Business travellers, families and backpackers value different things and respond to different prices.
- Demand forecasting. Look at past demand in each segment to predict whether it is likely to rise or fall. Forecasts tell you when to raise prices and when to run a promotion that brings in more guests.
- Yield management. Focus on the balance between price and volume: the price at which your rooms earn the most, not simply the one that sells the most rooms.
- Dynamic pricing. Change prices as demand changes, rather than holding one rate for a whole season. It keeps you in step with the market and helps you fill as many rooms as you can.
Why hotels need it most
Revenue management is useful in many industries, but in hotels it is essential. A night that goes unsold can never be sold again, so every pricing decision has a deadline.
Three numbers tell you how it is going. Occupancy is the share of your rooms that sold. ADR, the average daily rate, is what each sold room earned on average. RevPAR, revenue per available room, combines the two, so it shows whether a higher price or a fuller house actually paid off.
You do not need a dedicated team to start. You need clear numbers and an easy way to act on them. thelobbyboy's reports show occupancy, ADR and RevPAR by booking source and room type, the revenue and commission for each channel, and where your guests travel from. Rates can be set for any season, given their own plan on a particular channel, or moved up or down by a percentage across a date range, with minimum stays and closed-to-arrival dates sent to every channel from one screen. For pricing that follows demand automatically, thelobbyboy connects with Turbosuite.