Revenue management is a systematic process designed to increase revenue by leveraging tools to manage length-of-stay and thereafter over-laying effective pricing strategies to maintain the upside. Revenue management in the hotel industry is achieved by designing a strategic shift to managing revenue on an individual room basis, in a real-time, using data, analytics and the trading environment.
Forecasting and Controls
The Revenue Manager will create a forecast model of the potential revenue up-lift potential based on the ‘as-is’ position. A number of tools aid this process, including:
- Building booking curves;
- Account for “pick-up”;
- Segmentation demand modelling by market, group, and channel; and
- Calculation of error rate and account for its impact.
The impact of availability controls, including length-of-stay management, on revenue management and how they can be leveraged will also be considered.
Pricing Strategy and Distribution Channels
The Revenue Manager will set the right price for an asset, at a moment in time, and develop a differential pricing engine for each customer type. They deploy multiple distribution channels and data source strategies to aggregate market conditions and so price more effectively. With fluid booking conditions, comes the need to have variable pricing and an intuitive discounting capability. Pricing elasticity, optimal price mix, perceived fairness, and congruence with positioning and sales strategies must also be considered.
An important element of the Revenue Manager’s role is to create a group forecast and explore yieldable (and non-yieldable) business. This includes analysing incremental group costs and revenue opportunities. Exploring and creating models that calculate displacement costs and contribution margins to determine which channels are the most profitable, are a critical success factor.
Non-Traditional Applications of Revenue Management
We can apply revenue management principles and concepts to most hospitality-related industries, including restaurants, meeting spaces, spas, and golf facilities. Following a step-by-step process to develop, implement, and monitor a revenue management strategy will deliver demonstrable growth at the top-line.
- Refine the practice of revenue management to include other aspects of the hospitality industry
- Extend the practice of revenue management to other industries
- Lead a revenue management effort, from gathering baseline data to monitoring results post-implementation