What does Hotel Revenue Management Comprise?

Introduction

The success of a hospitality business greatly depends on the revenue generated from the business. So, Hotels are often seen employing various hotel revenue management techniques and strategies to increase sales and maximize revenue generation. Revenue management is a very popular and successful technique adopted by most hotel businesses to stay ahead in the number game (revenue) in their industry. Covering more on this, we have today in the article explained what is hotel revenue management, and factors that shape the most effective revenue-increasing strategies. So let us first understand the concept of hotel revenue management

 

What is hotel revenue management?

Revenue management implies understanding the trend in consumer behavior to accordingly sell the product at an optimal price. So, the definition of hotel revenue management states selling the right room to the right client at the right time at the right price on the right distribution channel with the best commission efficiency. Now that we know what is revenue management, let us learn about the hotel revenue management services or rather components that create the most effective revenue-increasing strategies

What does the hotel revenue management comprise?

Revenue management is defined by certain essential components that help build effective revenue-increasing strategies for your hotel business. The components that we are talking about includes-

·         Customer Segmentation

·         Demand Forecasting

·         Yield Management

·         Dynamic Pricing

Customer Segmentation

Customer segmentation is an essential component of hotel revenue management and pricing strategy marketing because it determines the most suitable price for different customer segments. So, basically in customer segmentation, the guests are segmented according to demographic criteria like age, gender, marital status, the trip’s purpose, spending habits, or interests. The status of a customer is based on whether a traveler, a new or returning guest, or business or corporate guests are classified and segmented. Prices are accordingly fixed based on this segmentation to make maximize revenue for the business.

Demand forecasting

Demand forecasting is another essential aspect of hotel revenue management services and strategy. This basically means analyzing information about past demand across all the customer segments. Based on historical data, hotels can predict the spike in demand or decrease in demand and accordingly set a strategy around it. This is a significant factor in revenue management as it helps in setting prices, creating promotions, and other marketing activities around it to increase sales and revenue generation.

Yield Management

Yield Management is all about setting the best price to sell a hotel room or service with maximum profit. While hotel revenue management is focused on enhancing the overall revenue of a business, including ancillary revenue and spending, yield management completely focuses on the price and the volume of sales.

Dynamic Pricing

Last but not least the dynamic pricing is another important component and an important revenue management service offered by revenue management companies to hotels for defining prices based on various factors. So, in this hotels can change the price according to market demand. Dynamic pricing strategies are built around selling the property for the best price possible. This is based on the demand, and supply, supply game and is based on various internal and external factors. These internal and external factors would include competitors’ prices, booking patterns, customer segmentation, customer profiles, etc. Dynamic pricing strategies allow hotels to keep up with the market demand and accordingly maximize occupancy rate, and the hotel revenue management KPIs. The pricing strategies can be customer-driven, competitor-driven, value-based, or even based on market trends.