Hotel revenue management has seen spectacular growth in recent years.
It has become such a fundamental part of hotel business strategy that it is now on an equal footing with marketing and sales in many hotels, and it is driving hotel profit growth.
Both chain and independent boutique hotels are turning to revenue management to help drive performance in an increasingly competitive sector.
Although while the hotel sector enjoys the benefits of revenue management, there is still much room for other types of accommodation providers, including B&Bs and vacation rentals to adopt revenue management. Smaller hotels too are yet to embrace it to the same degree as their larger lodging counterparts.
Of course, this is due in large part to tighter budgets, but it is important for managers and owners to consider that it is an investment whose purpose is to produce greater returns.
How revenue management helps small accommodation providers in three main steps
By focusing on three main areas, revenue management helps to drive success for small hotels, bed & breakfasts and vacation rentals. These three areas are inventory management, pricing tactics and performance measurement.
1. Inventory management refers to optimising occupancy levels and room rates, dictated by market supply and demand. Your rooms are your key revenue driver – your most valuable asset – and therefore, revenue managers focus first and foremost on extracting as much value out of them as possible while minimising costs.
A good revenue management strategy increases your distribution channels and ensures that no double bookings take place with automated updates through a channel management system or 2-way interfaces. This minimises human error and increases efficiency across the board.
2. Pricing tactics include all methods used to drive bookings at all times of year (and even the day of the week and time of day), and sales from elsewhere in your establishment, such as the bar.
These include price changes based on market demand, which leverages market data analytics. Other tactics include cross-selling and upselling, and different rate sets to drive bookings. For instance, these should include regular rates, promotional rates, package deals, group rates (which should offer a discount for bulk booking) and last minute bookings.
3. Performance measurement is crucial to see where refinements can be made. For small accommodation providers like B&Bs and vacation rentals, budgets tend to be more limited. For this reason, it is absolutely critical to measure your success on an ongoing basis.
Your PMS should be set-up effectively with segmentation and channel source codes to demonstrate where your revenue comes from. This way you can evaluate where you can implement improvements. A reservations system is fundamental in producing precise on-demand data and automating much of the process.
The final word
Competition levels are on the rise, notably from AirBnB and other peer to peer platforms, OTAs and rival hotels. In an ultra-competitive accommodation sector, B&Bs, vacation rentals and small hotels have to adopt and master new tactics to remain competitive.
Technology-based solutions are now replacing legacy and manual systems, and the small accommodation provider that neglects to consider them runs the risk of falling behind.
On the other hand, fully embracing technology-led solutions like a revenue management system can offer your establishment an essential advantage and help drive your profits to new heights.