A revenue management strategy
should be at the core of a lucrative independent hotel business plan as it allows hoteliers to anticipate demands and optimize availability and pricing.
What is a hotel revenue management strategy?
Hotel revenue management is a strategic concept for optimising your hotel's financial results and maximising revenue. It is based on an understanding that hotel pricing is dynamic and may change from day to day and is also dependent on which channel you are selling to. The purpose is to sell the right hotel room to the right guests, at the right time and price, with the best profitability.
In other words, hotel revenue management is the analysis of data to predict guest booking behaviour.
Accordingly, you then optimise your services and rooms to generate as many reservations, and revenue from them, as possible.
Most importantly it will also allow you to measure the effectiveness of your interventions and calculate the return on investment (ROI).
1. Understand the market
It's important to understand quickly the opportunities in your market segment.
If you know where demands come from and the different local factors that affect seasonal demand, you will understand your target audience, their needs, desires and expectations and you can quickly answer them.
Once you understand your market segmentation by behavior, you will be able to offer the appropriate room to guests at the right price. For example, if you know when guests book hotel rooms and how they do it, you can optimise offer prices for them based on each segment.
2. Do a competitive analysis
If you want to make the necessary adjustments, you will need to anticipate future demand and revenue based on employment trends, competitor performance, industry trends
, knowledge of currency reserves, room rates and revenue.
Competitive analysis is one of the fundamentals of a hotel revenue management strategies.
It not only helps you to understand your competitors' strengths and weaknesses, but it also helps you to find your position in the market.
You can track the overall performance of your key competitors- room rates, accommodation type, size of property, amenities, average ratings and reviews.
This research will help you in managing your revenue and provide you with more accurate forecasting.
Today, market competition is super fierce and ever-changing - this research should be done at least annually.
3. Build a responsive hotel website
A key part of revenue management is maximising revenue
through each channel and your website is the most important one.
To get new bookings with the lowest cost of acquisition, it is vital to be at the top of search engine results.
Your hotel website needs constant search engine optimisation (SEO) and must be responsive i.e. it must render perfectly on any mobile device.
Ensure your website has the following features:
- An integrated booking engine for direct bookings which converts on mobile devices as well as desktop
- Attractive photos and videos
- Up to date information about your hotel amenities, special offers and vouchers
- Open booking panel
- Well-designed landing pages for special offer ads
- Quick page speed (<3 seconds)
- Effective call to action buttons
- Easy navigation leading browsers to make a booking
4. Practice yield management
Yield management for hotels is an important and inseparable part of revenue management.
Whereas the latter encompasses all revenue channels, the former focuses on maximising the revenue generated through room charges and occupancy.
Yield management for independent hotels is all about supply and demand.
As your forecasting improves you can accurately increase room rates at times of peak demand – and crucially you will know when those times are and to what levels you can raise rates while still getting great occupancy levels.
5. Adopt the latest technology solutions
Technology is all around you. It's in the services you consume and in the payments you make.
Providing the latest technology for your services is a vital factor in increased bookings and hotel revenue.
Is your website using a content delivery network (CDN)? It will dramatically improve your site’s load time if you do.
Do you know the conversion rate of the merchant gateway you use to take online card payments? We have measured the conversion from various suppliers and there is a surprisingly large variation.
To boost revenue growth, you need a focused hotel revenue management strategy.
Luxury guests are more likely to book when your pricing model adapts to circumstances and will spend more in your property when you have a coherent plan.
The first step is segmenting the market and targeting effectively.
You need to track key metrics through analysis of your competition’s data and then apply the appropriate strategies to get the most out of your business.