Effective revenue management is the foundation to running a profitable hotel. But, it is no easy feat and requires an expansive skill set. From generating demand and promotional strategies in low periods, to constantly balancing the goal of increasing overall profitability and meeting the needs of guests.
It is a discipline that when done correctly can totally transform the commercial outlook of your property, however, it takes time, knowledge and expertise to master. Now, as a result of the pandemic, the function of revenue management has taken on a whole new dynamic which comes with its own set of unique challenges and opportunities.
A new dawn for revenue management
The entire hotel sector has been severely impacted by the pandemic. This left revenue managers wearing multiple hats and doing more with less - operating as both support staff and commercial strategists.
As we move through 2022, revenue managers are taking on a new challenge: operating with a leaner workforce to capture rising demand in a complex business environment. In this new hyper competitive landscape, hotel owners and operators are looking to their revenue managers to give them the edge.
Not just in terms of dynamic pricing strategies to capture early demand trends, but also wider commercial decision making. Revenue management is now more important than ever. It also needs to be more effective than ever.
With the market behaving like so, it is critical for revenue managers to have a strategy that is grounded in data.
In these circumstances accurate data should be a revenue manager’s source of truth. However, there is a lot of data out there and the manual analysis needed to adapt strategies to improve business performance is highly time consuming.
Concealed within this wealth of data are critical commercial insights, with technological assistance you can extract them and immediately start to see value.
For a revenue manager to achieve an optimal balance of efficiency and profitability, you need to develop the right technological base. At the heart of this lies the best possible hotel revenue management software, powered by industry-leading data to inform decision making.
With the right hotel revenue management systems in place, you can understand why things are happening in the market, uncover new revenue opportunities and mould a strategy, and flexible rate architecture to match.
Revenue management is a forever evolving discipline, yet the pandemic has rapidly accelerated this once gradual evolution.
More complexity means more data points
A revenue manager’s day-to-day is never easy, but over the past two years it’s become much more intricate. Month after month of lockdowns, travel restrictions and re-openings and closings, have led to seismic trends affecting the hospitality industry - from fast paced, changing consumer behaviour to sudden market demand fluctuations. They have all woven together a function of deepening complexity.
While the bedrock of revenue management may not have changed, the situation which you are now operating in very much has.
Among other factors, revenue managers now have to contend with:
As we emerge from the pandemic, to combat the acceleration of complexity, revenue managers need to be more data-centric - establishing an approach that compresses analysis, decision making and implementation into much shorter time frames.
The hotel industry was already seeing a proliferation of data prior to the pandemic, now revenue managers are faced with an avalanche of data points to analyse and make decisions based off of. Ultimately, there is too much data and too little time.
For revenue management to transition from a largely tactical discipline to one that’s strategic, there needs to be an acceleration in technological adoption.
The right revenue management software will help a hotel remain profitable even in times of the utmost unpredictability. Without solutions like these by your side, you are looking at analysing hours worth of data and spreadsheets each day, leaving little time for strategic decision making.
It is now mission critical to improve efficiency by eradicating time intensive manual tasks and freeing up the revenue management team to do what they do best, maximising profitability.
Owing to the excess of data points that now need to be analysed, the adoption of technology assisting in revenue management strategy has started to increase significantly. Additionally, with most new tech solutions being cloud based SaaS products, cost is no longer a major barrier to entry for most hoteliers.
Each minute you are spending manually working through data, is a minute that competitors who have already adopted technology are using to win business and strategically drive revenue.
Implementing the right technology
There have been rapid advancements in hotel revenue management software (especially over the last two years) from predictive market intelligence, to dynamic/smart compsets and enhanced benchmarking.
The human and artificial intelligence elements of revenue management are now much closer together, with solutions now able to automate a number of crucial tasks. Yet, human interaction with a solution is still key to its ROI.
There are a lot of revenue management software options on the market to choose from but not all revenue management software is created equal.
Many revenue management solutions can be time consuming to learn and use - negating the gains in efficiency and productivity that you were aiming to achieve. You need to look for a solution that has a straightforward user interface, with an optimal display of data, so you are provided with real-time, actionable insights that can directly inform your decision making.
It is also essential to use integrated solutions that can effortlessly combine and track the data of all a hotel’s commercial departments in one platform. Traditionally, revenue management, marketing, sales and distribution teams have all worked in silos.
This gives rise to departments that work in isolation and operate on the boundary of the business strategy, jeopardising wider organisational goals. When this disconnect envelops a hotel, efficiency suffers, which you can no longer afford.
Silos must be broken down as interdepartmental collaboration is critical to increasing revenue. The first step in accomplishing this is providing an easily accessible range of consolidated metrics for each department.
This completes the commercial picture and drives teams toward the common goal of hotel profitability, under a united strategy.
A new tech suite designed to maximise revenue
Prior to the pandemic, revenue management software was primarily based on historical data points. However, the universal market disruption caused by Covid-19 resulted in the need for new, forward-looking data points to predict demand and accurately forecast.
Now the starting point for any revenue manager should be to look at pre-booking, forward-looking data points, to view unconstrained demand in your market. A predictive market intelligence solution like Market Insight can help you create accurate forecasts for more informed commercial decisions, based on real-time demand projections, as can be seen in Figure 1 below.
Figure 1 - OTA/Meta Hotel Search Evolution - select global destinations - 13/04/2021 to 13/04/2022
The underlying aim of revenue management - which is to sell the right room, to the right customer, at the right price, and the right time, through the right channel - hasn’t changed. But in this complex landscape, pricing has become more analytical and highly dynamic.
A basic rate shopping tool is no longer capable of providing the insights needed to compete. By using real-time rate and market data that is refreshed live, a rate intelligence solution displays an accurate view of your competitors’ current, past and future rates.
There is also the need to adopt a promotional and discounting strategy that is flexible and adaptable to market conditions. Leading rate intelligence solutions offer granular rate data, delivering insights on discounting and promotions in your market, as can be seen in Figure 2 below, which is taking from the Rate Strategy feature within Rate Insight.
Figure 2 - Percentage of Hotels Using Non-Refundable, Semi-Flex rates - select global destinations - 04/11/2022
By combining forward looking demand data with advanced rate intelligence you can immediately identify demand trends and then implement the appropriate marketing, pricing and promotional strategies to capture bookings ahead of your compset.
With the complexity and number of decisions that now must be made, a data-centric, strategic approach to revenue management is the answer to making the most of short, mid and long-term revenue opportunities.