Revenue Management for hotels concerns with creating strategies that optimize revenue generation from selling a room nights, a fixed and perishable resource. While your rooms and your hotels are there to stay, every single room night going unsold is lost revenue. The challenge in creating the perfect revenue strategy for a hotel is to sell a room to the right guest for the right price at the right time.
Revenue management for a hotel revolves around the same basic principles of supply and demand economics in a well-thought and strategic manner to make the optimal use of resources to generate incremental revenues.
The base of a good strategy is formed by the historical data and the ability to forecast future demand. That being said, the first step towards creating better revenue management strategies for your hotel will involve maintaining a strict database. To maximize your hotel revenues there are several revenue management tactics that can be implemented.
Although most hotels are already doing it and it is a very basic step, you need to identify what your customers from different market segments are willing to pay for your rooms and service. The deeper your analysis goes the most you can extract, in terms of revenue, from your guests. This can be done on the basis of, but not limited to, the following parameters:
Room Types: Budget, Deluxe, Super Deluxe, Suite
View: Scenic View, Ocean View, Non-scenic
Size: Large rooms with more empty spaces or compact rooms with more amenities
Booking Time: Weekday, Weekend, Seasonal, Monthly
Length of stay: Short stay. One or two days OR Longer stay.
Amenities: Wi-Fi, Minibar, Toiletries
Meal Plans: American Plan, Modified American Plan, Continental Plan, European Plan
As we mentioned earlier, intelligent forecasting is the essence of a successful revenue management strategy for a hotel. Historical patterns provide a good basis for a forecast, however your forecasting should take in a lot of other variables into consideration. These variables can go on to include demand across all hotel segments, price hikes and local events among many others. The key is to consider all factors that are likely to affect the purchase behaviors of travelers. Also you cannot pick arbitrary rates for a particular period of time and expect sales. You need to work with a clearly marked pricing plan that extends beyond the vague peak season and low seasons. Defining a pricing strategy based on your inferences be grouped into months is a better approach. Another important aspect is to work out how you shall be managing your prices as the period approaches and the demand for rooms fluctuates. You also need to factor in other scenarios such as increase in price competitiveness from the competitors. Addressing various demand scenarios beforehand will allow you to react more quickly to market changes and help implement the strategy to maximize revenues.
Among the easiest approach to filling guests into your rooms is to use the “first come, first serve”, but is not the best strategy for revenue performance of your hotel. The idea is to go beyond this approach to determine the best business for your hotel. The best business for your hotels does not necessarily have to the highest paying and should incorporate other factors such as duration of stay, loyalty, etcetera. Before the beginning of a session of a period in your demand forecast, you need to identify these best business opportunities and the likelihood of them returning for a room.
Additionally guest transactions in other departments such as spend on food and beverage, spa usage and souvenir purchases must be taken into consideration when determining the ideal guests for your forecast season and guest preferences.
By indulging in data such as this, you will be able to determine the value of each customer from various market segments and allow for better decisions as to how much inventory should be blocked for high-value guests during high demand or which guests should be offered complimentary ancillary services to boost sales during low demand.
This will ensure that you optimize your RevPAR by letting in more guests which bring greater value, and therefore more revenue to your hotel, not just for a particular season but during the entire lifetime of the property.
You can optimize your revenues by improving the operational performance of your hotel. Considering different demand patterns, affect the staff required to run the property optimally, you can optimize your staff hiring policy accordingly. An integral part of hotel revenue management being the generation of an accurate demand forecast, you can have the right amount of staff working for you at the right times. This will not only help you improve customer satisfaction during high demand, but optimize costs during low season.
A demand forecast can be precisely drawn down to peak check-in and check-out times, allowing you to further streamline your staffing levels. The same principle can be applied to your inventory levels to help reduce inventory carrying costs.
An efficient revenue management system can help you with better forecasting and derive more out your data. However selecting the right revenue management system is pertinent to success. Revenue management systems can also help you create better room rate strategies which when combined with accurate forecasts can help you achieve better revenue performance.
So there are a number of ways which can be incorporated into your revenue management strategies and help you improve your hotel revenues. With evolving business environments, hotels too need to adopt better strategies to maximize revenues.
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