As the effect of Covid-19 on the hotel industry is still playing out and with major companies downsizing and others closing their doors, one question remains. Demand is expected to decline, and hotels will see a drop in average rate due to heavy discounting. Will you sustain a profit during this time of crisis? Revenue management is defined as using the right channel to sell a particular hotel room to the right customer willing to pay the right price at the right time It is not a new concept in the hotel industry, large hotels have an onsite revenue manager and in fact, many brands also offer some form of revenue management services for a fee. Now is the time to re-evaluate the cost for revenue for hire and its contribution to your bottom line.
A few of the most important components of revenue management are identified throughout this article.
A major component of revenue management should be the ability to accurately forecast how much revenue a hotel will generate over a given time period, allowing hotel operators to control variable expenses and payroll. Hotels that do not forecast at all are forced to be reactive to the amount of money earned instead of being proactive by setting a plan in place and knowing ahead of time how much they can spend to ensure their cash flow.
As historical market segments and room nights consumed are tracked, hotel operators will earn the pick-up trends, future demand, denials, regrets, no-shows, cancellations, and unexpected booking patterns. The revenue forecast allows hotel operators to efficiently work schedules and operating expenses relative, and control cost to achieve desired profitability.
Knowing what booking channels are available when to open them or close them based upon demand and revenue goals, allows the hotel quick adaptability to attract more occupancy in a low demand time or displace low rated business during high peak season.
It is the primary function of a revenue manager to have full knowledge of market conditions, seasonal curves, and demand generators as they will influence revenue strategies.
First of all, you should have the correct hotels designated as the comp set and you must be honest with yourself in positioning within that Comp Set. A vital element to revenue strategy is to clearly understand how each hotel ranks based on location, cleanliness, service, security, and value, and understand your strengths and weaknesses against your competition.
Many hotel operators overlook the importance of a thorough revenue meeting. A revenue meeting is where you plan the strategy for the next week up to a year depending on the hotel and its needs. Revenue meetings are crucial to the success of the hotel because it correlates directly to the revenue generated and ultimately the profitability of the hotel.
Optimize revenue with creative pricing to support budgeted segmentation mix of business to protect planned profitability. Pursue maximum market share and update sell strategies to maximize production from desired distribution channels.
Many of the brands that offer revenue for hire service use a simple cookie-cutter format in their revenue for hire model. Simply looking at STR reports, comp set rates, future pick up trends and group bookings are not enough. Drilling down into items such as market segmentation, booking channels, detailed pricing analysis, and understanding market condition are oftentimes overlooked due to time constraints and poor understanding of the local market. Brand revenue management fees can average about $17,000 – $20,000 annually, this cost can be reduced, and the process improved. Professional Hotel Solutions can do just that. We provide a robust revenue management program and a tailored approach to maximizing profitability while reducing revenue management fees by up to 50% based on the number of rooms.
Revenue for profit case study: https://hotelconsultingcompany.com/?na=view&id=1
If you are currently without a revenue manager or you are looking for a more affordable alternative to brand revenue management services, we would be glad to schedule an in-depth presentation of our revenue management options.
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