Revenue Management in a Franchised Environment
By Mark Masuda Vice President of Sales & Marketing , AmericInn | October 05, 2014
Revenue management is usually characterized as selling the right product to the right customer at the right time for the right price. That's a lot of rights! While revenue management is certainly a big idea and it's easy to understand how it could be scary for hoteliers who are not used to thinking about pricing strategies, it's absolutely critical for any owner or operator to understand the basics of even the simplest of pricing strategies-particularly in an industry rife with perishable inventory, advanced bookings, high competition, and wide swings in supply and demand driven by a myriad of variables.
Even if you have chosen not to utilize a holistically-integrated, high-technology revenue management system, you can still embrace the discipline of revenue management to maximize your profit.
For us at AmericInn, the concept of revenue management is at the core of our operational goals; it is a fundamental philosophy we attempt to teach all our franchisees. Best of all, we have learned ways to implement an RM strategy that works: in 2014, we have seen an above-average increase in REVPAR year to date as a result of our RM strategies and tools. We believe in revenue management and we believe it works.
The History of Revenue Management
The fundamentals of revenue management started in the airline industry and specifically at British Airways. The airline tested "earlybird" discounts to stimulate demand for seats that would otherwise fly empty. Under the leadership of British Airways CEO Robert Crandall, American Airlines took the concept a step further and integrated databased analytics to maximize revenue through inventory control strategies. Crandall was friends with J.W. "Bill" Marriott, Jr., CEO of Marriott International and the two worked together to bring revenue management philosophies into the hotel business as well.
Marriott invested in automated revenue management systems that provided daily forecasts and inventory recommendations for each of its 160,000 rooms at its Marriott, Courtyard Marriott, and Residence Inn brands. Marriott's system also forecast guest booking patterns by price and length of stay enabling them to offer targeted discounts to price-sensitive market segments based on demand.