How To Boost Business Using Hotel Revenue Management?

Revenue management in the hotel industry is an exceptionally complicated machine. It is in motion all the time, needing routine maintenance and occasional replacement of parts. Though the operation of the machine might seem overwhelming, particularly to novices in the space of revenue management of hotels, knowing how and why each piece functions bodes for long-term success.


The concept of revenue management of hotels refers to many practices and principles which aid hotel professionals in predicting how customers are likely to act in the future. Though specific objectives might vary from one property to the other, certain primary objectives of revenue management are optimization of prices to cater to travel demand, overtaking the progress of competitors (comp set), raising profits, and boosting the performance of hotels from year to year.

Through the use of data about performance and other analytics of the hotel, revenue managers decide on rates, determine strategies of distribution, and make efforts to raise the quantum of revenue generated by the property. All this must be done without hampering the satisfaction of guests. For this, there are many revenue management tools in hotels.

Dangers of poor revenue management

All aspects of the performance of hotels can be impacted negatively if hotel revenue is not managed effectively. Directors and revenue managers who do not meticulously conduct tracking, analysis, and utilization of reporting revenue might:

  • Damage to the reputation of the hotel
  • Push businesses to compete with hotels
  • Cause miss of rate opportunities
  • Hurt loyalty of guests

Also, revenue and sales directors tend to earn part of their salary from the meeting of revenue goals, and if such goals are not realized, they could have a major effect on their annual earnings.

Strategies for revenue management

It is imperative that strategies for revenue management should be implemented which adhere to the revenue goals of the hotel and its budget. The followings are the leading strategies and revenue management tips for hotels:

  • Begin with an authentic inventory

For the creation of a successful strategy of revenue management, one should begin by taking a good, in-depth look at the way the revenue of the hotel is being managed currently. Prior to making any big changes, pose the following questions to make an assessment of the current position of the hotel:

  • What is the current strategy of revenue management?
  • What are the objectives and goals of such a strategy?
  • What is the nature of the strategy for group pricing?
  • Is the style of strategy reactive or proactive?
  • Is there awareness of local attractions and events?
  • Is there knowledge of demand generators?
  • Whether there is a keen tracking of pricing by competitors.
  • Are you aware of the market mix and whether it is balanced?
  • Is there actual business emerging from proposals and leads?
  • Is there an ability to identify the cause of changes in demand or anomalies in rates at the hotel?

After gaining such fair knowledge of the weaknesses and strengths of the current revenue strategy, opportunities for improvement can be identified for creating a judicious strategy for revenue management.

  • Practice dynamic pricing

There is a simple concept of dynamic pricing in the hotel industry: a hotel room must be priced on the basis of demand and supply (equilibrium price). Generally, room rates should be enhanced when demand exceeds supply and reduced when there is poor demand for boosting occupancy.

For this, there must be consideration of the demand for 365 days of the year. Demand reflects various levels of revenue potential. Do things like tracking lows and highs of occupancy on the basis of the seasonality of the specific location of the hotel.

  • Become a market expert

A good strategy for revenue management takes into account demand fluctuations and seasonal changes. The major generators of demand in your area should be identified, the sourcing behaviour of planners must be reviewed, and travel patterns in the market must be analyzed. Determine the shoulder, peak, and off-peak seasons of the hotel in order to make maximum the rates and fill dates of future needs.

Maintain a calendar featuring dates of special events and restriction of black-out dates, staying updated on community projects, actions of competitors, and events in your area. Efforts must be made to know more about the market compared to revenue managers of competitor hotels in the area. With maximum information, a comprehensive strategy for revenue management can be designed.

  • Establish a budget through forecasting data

Proper forecasting and budgeting can help revenue managers of hotels to avoid the depletion of their financial reserves. In the process of preparing budgets, revenue managers and hoteliers must conduct reviews of historical data, reporting of hotel rates, and track the performance of competitors. This is to help in the identification of revenue opportunities that will affect budgeting decisions.

The performance history of the hotel will help in identifying market trends of the past and to better predict trends of the future. Tracking and reporting of hotel data must cover the following:

  • Sudden changes in demand
  • Unpredicted shifts in levels of occupancy
  • Patterns of bookings
  • Missed opportunities


  • Keeping track of the competition

Every revenue manager desires to know what is provided by their hotel in contrast to competitors. What are the types of rooms available at every hotel? Which hotels possess space for events? What are the rates charged by competing hotels in your area? Which hotels have special policies for pet-friendliness? Note whether your hotel is garnering a fair share of business in the market. In case this is not so, one must dive deeper into the data of competitors.

  • Segmentation of guests to boost repeat bookings

Guest segmentation is a tool many hotel revenue managers use to characterize unique groups of travellers. Hotel guests and travellers may be segmented as follows:

  • Leisure travellers
  • Business travellers
  • Group travellers
  • Corporate negotiated travellers
  • Wedding guests
  • Attendees of events etc.

The habits of various segments of travellers should be analyzed to understand customers better. Conduct reviews of preferences of room types, purchase habits, and stay patterns to gain an understanding of the various kinds of hotel guests.

Using such segmentation of guests, you can create exclusive promotions and offers that appeal to specific kinds of guests. One can entice loyal customers to do repeat business and return to the hotel by creating targeted promotions and personalized marketing campaigns.

In sum, these are the tips to use for creating revenue management strategies for the hotel business. Such a strategy permits you to maintain profitability and accomplish revenue growth, even if there is a limit on the number of rooms in the hotel.

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