The Revenue Management Business Process, Designed to Produce Results

By Trevor Stuart-Hill President & Founder, Revenue Matters | August 10, 2014

The unique aspect of the hospitality industry when compared to many others is that lodging establishments come in all sorts of shapes and sizes. Some have extensive resources at their disposal while others simply don’t.

In smaller lodging establishments and in a vacation rental management setting where margins are often razor thin, individuals often perform several roles simultaneously. In cases of larger hotels and resort properties, specific individuals are dedicated to the role of revenue management. Despite these apparent differences, there are some core best practices relating to revenue management that are universal.

What is Revenue Management?

“Revenue management is a business process that is designed to optimize the revenue performance of an asset through all market conditions.” – Trevor Stuart-Hill

In order for revenue management principles to apply, four criteria must be met:

  1. Constrained Capacity: fixed inventory (or resources) available for sale
  2. Perishability: revenue producing potential of inventory (or resources) diminishes rapidly or instantly
  3. Customer Segmentation: different customers are willing to pay different prices
  4. Predictability: ability exists to forecast demand for future points in time

Given the above set of criteria, it is easy to comprehend how revenue management principles can apply in a variety of settings including, parking lots, apartment housing, advertising, restaurants, golf courses, spas and even surgery centers.

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Coming up in February 2018...

Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.