Hotel Revenue Management

What is Hotel Revenue Management?

For over 30 years we have been hearing about revenue maximization and Revenue Management, an evolution of Yield Management that has gradually spread to the hotel sector as well. But what is it about? Let's clarify a bit by starting first from the definition of Hotel Revenue Management. By Hotel Revenue Management we mean a set of coordinated activities that aim to optimize occupancy and maximize hotel revenues: this goal is achieved through integrated management of the price and available rooms that try to predict the behaviour of demand. In simple terms, his goal is to sell the right product, to the right consumer, at the right price at the right time. The revenue manager, therefore, tries to influence the behaviour of demand (a flexible element) according to the capacity of the hotel (an element fixed). But how can he do it? The solution is to segment the question. In fact, it is not uniform as customers are different from each other and assume different behaviours: applying different prices aimed at the various segments of the demand will lead us to obtain from each customer the maximum amount that they are willing to pay for our service and increase our revenues. Now that we understand this approach, how can we put it into practice?

Let's see briefly in which phases the Hotel Revenue Management process is articulated.

  1.  Segmentation and Pricing

First of all, we have to define the customer segments we want to serve; once this operation is completed, we will apply one or more rates to each segment depending on the services offered and the operating costs of the hotel.

  1.  Forecast

In the second phase, we will make a forecast of sales based on the analysis of historical data, bookings on the book, market trends and our competitors.

  1. Optimization

In the third phase, we will optimize the rates based on the sales forecasts in order to maximize our revenues.

  1. Booking

The last step consists of applying the rules defined in the optimization phase and recording the sales made to evaluate the effectiveness of our Revenue Management strategy. Remember that to these four fundamental phases, the control phase must be added, as it is necessary to constantly monitor any changes in the behaviour of customers, the market and competitors. A hotel benchmarking platform such as HBenchmark can greatly facilitate the work of the revenue manager, as it allows you to choose from a wide range of KPIs (indicators) such as Occupancy, ADR and RevPAR and provides historical and forecast data on market trends and behaviour of competitor hotels. With this post, we have tried to give you a definition of Hotel Revenue Management and a concise explanation of the activities carried out by the revenue manager. Keep following our blog to find out more on this topic!

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