For hotel owners looking to grow their business, a robust revenue management strategy is of the utmost importance, helping to optimise business results. However, under the broader revenue management umbrella, there are many smaller strategies that can help to facilitate growth. In this article you find nine revenue management strategies that those in the hotel industry can employ to achieve this ultimate objective.
What is Revenue Management?
Revenue management is a popular concept within the hotel industry, and is used to optimise a hotel or resort’s financial results by maximising revenue. The accepted definition is: selling the right hotel room, to the right customer, at the right time, for the right price, via the right channel, with the best cost efficiency.
Typically, it requires businesses to make effective use of performance data and analytics to predict demand, establish a dynamic pricing model and maximise the amount of revenue that the company brings in.
Although revenue management is applicable to other industries, it has significance in the hospitality industrybecause hotels deal with a perishable inventory, fixed costs and varied levels of demand. Revenue management is considered important because it takes the guesswork out of key pricing decisions. More extended information about revenue management you can read in the article “What is revenue management?”.
9 Revenue Management Strategies
Below, you find a list of nine revenue management strategies you can use to grow their hotel business.
1. Understand Your Market
In order to implement a successful revenue management strategy, it is imperative that you have a clear understanding of your market, where demand comes from and the various different local factors that might affect seasonal demand. You also need to be aware of your audience and their needs, wants and expectations.
Moreover, you need to understand the competition that exists within the market and make strategic decisions regarding price, discounts and advertising with this competition in mind. Remember, this competition may not always be obvious, and may not always be in the same location as your hotel.
2. Segmentation and Price Optimisation
The concept of selling the right room to the right person at the right price requires you to appropriately segment your customer base. To do this, you need to identify different ‘types’ of customer and then look at these different segments and evaluate when they book hotel rooms or hotel facilities, how they book them and other habits.
When this is carried out, it allows you to optimise prices for those different segments. One of the key advantages of this is that once prices are optimised for a particular segment, price changes can be minimised. This, in turn, can help to generate customer loyalty from those who appreciate the price consistency you offer.
3. Work Closely With Other Departments
Next, it is important to achieve close collaboration between the various different hotel departments, such as sales and marketing, in order to ensure that your revenue management strategies and their individual departmental strategies are in alignment with one another, and so that you can address challenges collectively.
Identify key departmental decision makers and bring them on board. Work with them to make adjustments to your revenue management strategies, rather than imposing your will, which might be met with resistance. Close collaboration will also help to ensure that you are always presenting consistent messages to customers and clients.
4. Forecasting Strategies
One of the most important aspects of revenue management is forecasting, which allows you to anticipate future demand and revenue, enabling necessary adjustments to be made. Within the hospitality industry, high-quality forecasting relies on accurate records being kept, including occupancy, room rates and revenue.
Most forecasting strategies rely heavily on using historical data to spot trends. For example, if you notice an upturn in business in the past three Julys, it is sensible to assume the same may occur next time. However, forecasting also requires an awareness of current bookings, competitors’ performance, local events and wider industry trends.
5. Embrace Search Engine Optimisation
Search engines offer one of the single biggest opportunities for those operating in the hotel industry to attract customers, which makes search engine optimisation an important part of a robust revenue management strategy. Through SEO, hotel owners can improve the visibility of their website on search engine results pages.
As a consequence, you can improve the chances of attracting business from customers who are not specifically searching for your hotel, but who are searching for a hotel in your location. To achieve this, it is best to operate a solid content marketing strategy, and ensure your website’s design is optimised for SEO purposes.
6. Choose the Right Pricing Strategy
There are many different pricing strategies out there, and no one strategy will guarantee success. Instead, those in the hospitality sector need to consider the best strategy for their particular hotel, based on what they have to offer, who they are trying to attract and what strategy their competitors are employing.
A competitive pricing strategy, where prices are set based on other hotels prices, puts your business in direct competition and is good when your hotel has more to offer than your rivals do. Yet, in slow seasons, a discount strategy might be best, because a low-paying customer is better than an empty room. Another option is the value-added approach, where rates are higher, but additional value is provided through extras and freebies.
7. Incentives For Direct Bookings
While it is certainly important to cater for all distribution channels and meet customers where they are, rather than where you want them to be, it is also sensible to try to maximise the number of direct bookings that are made.
The primary reason for this is because direct bookings do not require commission to be paid to third parties, which means they are ideal for maximising revenue. One option is to offer exclusive incentives, such as loyalty points, or freebies, for customers who book directly through your own website.
8. Focus on Mobile Optimisation
For those in the hotel industry, mobile has become one of the single most important revenue streams. As a result, any hotel or resort that is operating without having prioritised mobile optimisation is already operating at a distinct disadvantage compared to their competitors.
Make sure your website is optimised for mobile viewing, meaning it loads quickly, the pages display properly on mobile devices and all buttons are fully functional. In addition, you need to ensure your booking process is also optimised, so that customers can book rooms from their mobile device, without needing to switch to desktop.
9. Work With a Freelance Revenue Manager
Finally, in many cases it can be beneficial to enlist the help of a freelance revenue manager, who will be able to bring knowledge, expertise and experience into your organisation. Freelancers are used to coming into hotels and getting to work quickly, and can work as and when you need them.
Appointing a full-time revenue manager internally means employing them full-time, but a freelancer will only need to be paid for the work they actually do, meaning less of their time will be wasted. Moreover, because of their established expertise, you will be able to save money on costs associated with training them.
The concept of selling the right hotel room, to the right customer, at the right moment, for the right price, via the right channel is important for maximising revenue and facilitating growth. By following the nine revenue management strategies above, owners in the hospitality industry can improve their chances of achieving this.–