Hotel Revenue Management: More Than Room Centric
By Robert O'Halloran Professor & Director, Hospitality Management, East Carolina University | October 2022
Revenue management is not only a trendy concept, but it has evolved into a career pathway.
Numerous young managers have embraced revenue management as a practice to optimize a hotel or resort's financial results by maximizing revenue.
Revenue management is seen by some as a fast track within an organization. For example, a member of a panel of experts noted "What I hope to see in the future is more recent graduates diving deep into revenue management and technology. People are interested in what goes on behind the scenes in the automation of revenue management processes, especially forecasting and pricing". This new breed of revenue management tech enthusiasts will enable our revenue management systems to have better well-trained machine learning and algorithms.
Generally, the accepted definition of revenue management 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. Kim Campbell in a 2022 article also notes that the term hotel revenue management refers to various principles and practices that help hotel professionals predict what customers will do in the future. While specific goals may vary from one property to the next, some primary objectives of hotel revenue management are to optimize prices to match travel demand, outperform the competitive set, increase profits, and improve hotel performance year-over-year. However, to best keep revenue management current, the focus and definition need to adapt to include the entire hotel or resort operation and focus on providing value and creating revenue.
Total revenue management has been discussed for more than 20 years. Still, the pandemic has brought it to the forefront due to the shift in business segmentation mix and the need to commercialize all available space at the property. The concept of total revenue management can and should include rooms, food and beverage options, plus other revenue streams such as spas, AV, retail, recreation and more.
Research from Revfine.com noted that hotel operators and revenue managers needed to fully embrace understanding your market, segmentation, price optimization for your property, forecasting strategies, and perhaps working with freelance revenue managers. Operational tactics should include working closely with other departments, optimizing search engine performance choosing the right pricing strategy, providing incentives for direct bookings and adapting with a focus on mobile optimization.