Hotel Business Review Archives

At its core, revenue management in the lodging industry is simple – in theory. In practice, it is an art and science, executed in a strategic manner. Evolving relatively quickly from simple inventory control, revenue management has transitioned from a tactical nuts-and-bolts operation to a profession requiring strategic thinking, analysis and execution. Understanding the strategic implications of revenue management decisions, and how they affect every part of the organization – large or small – is critical to understanding guest behavior. Managers at every level who understand the strategic role of revenue management will be able to make a bigger impact on the bottom line.

Many companies have tactical social media programs managed by the marketing department, but the industry as a whole has yet to fully exploit the potential of this emerging data and communication resource. The revenue management department, as it takes a more strategic role within the organization, is poised to be an early adopter of the opportunities provide by social media. In this article, I will discuss a framework for evaluating social media-related, revenue management opportunities which can be used in revenue management and across the organization understand the role of social media in supporting better business decisions.

Many revenue management professionals struggle when it comes to measuring and articulating the impact of their initiatives to senior management. Industry professionals should spend time considering the methods they use to measure the impact revenue management is having on their hotel so that steps can be undertaken to provide a compelling value proposition. In order to be truly effective in the job, revenue managers need to understand that devising, implementing and agreeing on “what success looks like”, in many cases, is as important as the activities themselves, and will ultimately go a long way towards supporting their success story.

In the old days yield management systems worked best when paired with complex and arcane pricing structures such as the ones that were used at airlines and hotels. For other industries, though, the complex techniques and price structures from airlines and hotels weren't really applicable. Fast forward to 2011. The emergence of state of the art pricing and revenue management systems has introduced a shift from a "yield" approach to "pricing" approach. Whereas "inventory classes" and "yield management" was something that a few industries like airlines and hotels cared about, "pricing" is something that impacts every industry.

In today's highly competitive hospitality market, a heightened understanding of a guest's preferences and total worth will enhance a guest's experience, maximize revenue and ensure loyalty, while establishing market share for your hotel. While there have been many advances in revenue management throughout the years and market segmentation and channel management strategies have become more targeted in identifying and reaching guests who could add revenue to a hotel, some hoteliers do still not understand the full value of their guests.

The formal practice and profession of revenue management continues to be one of change and evolution. Keeping up with advances in technology, changes in marketing and increasing numbers and types of distribution channels requires more flexibility than ever before. Amid these developments, the online travel agency (OTA) has forever changed the rules of revenue management, affecting areas ranging from communications to rate parity. Here, Christian Koestler of Lixto, Inc., outlines some of the significant ways OTAs are impacting revenue management today, and what managers can look forward to in the future.

In pricing and revenue management, hedging your bets with a tried-and-true process may actually be riskier than taking a chance on something different. It sounds counterintuitive, but the fact is that the conservative route to pricing practices is costing big hospitality firms millions in revenue, risking their future viability. Over the past few decades most hotel chains have adopted some form of automated revenue management (RM) system. But there are still some medium and large chains that have not. Worse yet, as some of these chains churned through acquisitions and ownership changes, their RM systems were abandoned or shut down. During the last decade’s brand consolidations, industry realignment and ownership changes, business intelligence (BI) tools were growing in maturity and sophistication.

Hotel Revenue Management (RM) is maturing, and more and more hotels have implemented RM programs along with advanced RM software to automate pricing. As the discipline matures, the law of diminishing returns begins to apply. More and more effort is required to squeeze our fewer and fewer dollars from hotel rooms. Smart revenue managers are turning to revenue generating assets outside of the hotel room, like function space , restaurants , golf courses and spa, as the next potential for revenue gains. In a world where most hoteliers are already doing more with less, how do you even get started?

It is clear that revenue management practices can help hotels increase revenue, but successful revenue management counts on consumers being willing to pay different prices for essentially the same product, based on the hotel’s expectation of demand. Hotel managers have good reason to be concerned about negative consumer reaction to demand-based pricing. Research has shown that consumers will punish firms that they perceive to be acting unfairly in their pricing strategies by refusing to patronize them in the future. So, how can hotels balance the risk of negative consumer reactions with the benefits of variable pricing?

With Conferences & Events revenues accounting for a significant portion of a hotels financial performance, an increasing number of companies are starting to focus on these activities to support their facility's bottom lines. However, with the rise in prominence of Conferences & Events, there are a number of key issues that savvy revenue managers should consider, including: what are the key issues needing to be addressed when trying to optimize conference & events space and more importantly how will the role of the revenue manager look in the future?

For many hoteliers, 2010 will forever go down in history as the one that got away. As the economic downturn bottomed out, hoteliers around the globe received an unexpected boost from international tourism demand which offset some of the implications of financial recession. Future forecasts are frustratingly mixed. Whilst some financiers are flying the flag for recovery, naysayers continue to cast doubt with cries of a double dip recession. As long as savvy hoteliers are amply prepared with the right intelligence, they will make educated and informed decisions when developing their negotiating strategies for 2012 and enter into the year in a strong position.

Revenue management and marketing really are two sides of the same coin. Each department holds key pieces of information about demand that, when integrated, result in critical insight about demand patterns, product preferences and purchase behavior. Unfortunately, employees in these two closely related functions do not always work well together. Misaligned goals and poor communication result in situations where marketers, with a goal of generating demand, sends out discount promotions that dilute rates during peak periods. While revenue managers, trying to maximize revenue, close off promotional rates meant to encourage stays from the most loyal guests. These conflicting activities damage revenue performance and guest relationships.

Lodging experts have written numerous articles on revenue management aimed at addressing specific tactical issues on pricing, distribution and measuring results for those “inside” the operation. By contrast, this article is intended for the “outsider” – namely individuals closely vested in hotel performance, but not directly involved in daily operations…hotel Owners. While the art and science of revenue management should be left in the hands of the property management and asset management teams, here are some key considerations which may be helpful to hotel owners in evaluating the role and effectiveness of revenue management and understanding the influence it can have on hotel performance and overall asset value.

Rate dilution has continually plagued the hotel industry; it provides a temporary fix to increase occupancy and sometimes increases market share. However, it also has the potential to incur long-term damage to a property and its reputation among consumers. When properties take a reactive approach and lower rates without a larger strategy behind that discount, they run the risk of losing loyal customers willing to pay full price – price cannibalization. Hotel management must remain proactive and work collaboratively across property teams to influence the property’s rate strategy and avoid the rate dilution war. Following, note several best practices in property revenue management.

While rate dilution provides a temporary occupancy fix for properties it has the potential to cause long-term damage to both the property and its reputation among consumers. Hotel management must remain proactive and work collaboratively across property teams to influence a property’s rate strategy and avoid the rate dilution war. When management works with all departments that could provide insight, including marketing, operations and sales, teams they can generate a proactive strategy based on in-depth market knowledge. While each hotel does not have an on-site revenue management team, every property does need a proactive, targeted plan.