4 Tips for Successful Hotel Revenue Management
Revenue management is a crucial part of any business and plays a significant role in how hoteliers best position themselves to maximize total hotel profit. With the introduction of technology, revenue management has gradually become more strategic and more centralized. However, customers are now too also equipped with a wide range of tools that help them navigate the market of hotel rooms and find deals that don’t always contribute to the hotels’ revenue growth.
While each hotel needs to develop a unique revenue management strategy to suit its particular situation, here are 4 tips that can help increase your profitability.
Focus on Value: While there has been a long-standing belief among hotel owners that offering lower prices helps drive more revenue, nothing could be further from the truth. Frequently pulling the price level is an extremely short-sighted play; it is not the best way to maximize profits or attract the right guests. There is even a study to back this up! Taking 10 years and over 4,000 hotels the “Competitive hotel pricing in Europe: An Exploration of strategic positioning” report found that extensive price fluctuations will diminish revenue performance and emphasized that hotels should make pricing decisions based on its capabilities and their value proposition. Basically, the price is not the only thing guests care about and anyone looking for long-term profitability needs to look at the value that they are providing to their guests. When it comes to creating value in your hotel product you could try offering optional added-value items, such as parking, free breakfast, food and beverage packages, length of stay deals, discounts, and extra discounted/free nights as add-ons to a basic stay etc. At the end of the day, the value will always be the best competition differentiator you have that cannot be easily replicated.
Choose The Right Distribution Channels: The distribution channels you choose not only determine whether or not your product sells but how quickly and at what cost. Since no two channels are created equal it is important that you evaluate and choose your distribution channels carefully to understand which has the potential to provide the most lucrative return.
You should consider everything from your competitors; what methods your competitors are using, and, more importantly, why. Determine their potential; what are the marketing opportunities the channel provides. Examine costs and the benefits; what will net you the most amount of revenue at the end of the year. Establish the technology it uses, the ease of channel management, its compatibility with your own property management system and the integration it offers. A real-time two-way interface with your PMS is an ideal solution as it cuts down on repetitive work, reduces errors such as overbooking and creating duplicate entries.
The most important thing you can do is carefully consider your options and select channels that is suited to your business and overall revenue strategy.
Invest In Direct Booking: Nearly all properties are working with OTA’s. Booking through external partners such as online travel agents is important. They bring travelers to their properties and fill rooms. But, direct bookings are the most desirable method of guest reservations. Direct bookings help lower distribution costs, create customer loyalty and repeat business.
You can encourage direct bookings by offering value-added incentives – like what we mentioned in our previous point. And considering the vast majority of guests make reservations online you should have an optimized website that is not only visually appealing, intuitive, and easy to navigate but one that assists your search results, loads quickly and is mobile friendly. If it not done already, you should also have an integrated web booking on your website with a clear call to action and as fewer clicks as possible for easy booking. Similarly, your reservation phone number should be easily accessible at all times or consider having an online messaging service to help users complete their booking journey. There are many other ways to increase and incentivize direct reservations such as leverage online reviews and comments, targeting abandoned bookings etc.
So, instead of investing in commissions relying on OTAs, you should look to lower you should invest in increasing your direct bookings and start building it as the dominant revenue source for your property!
Manage Your Brand Reputation: By improving your hotel reputation you can increase both your revenue and your guests brand perception. Sounds interesting? Read on! A study from the Cornell School of Hotel Administration established that guest satisfaction has a direct impact on the commercial performance of hotels. The study says that an increase of 1 point in the hotel’s review scores leads to an increase of 0.89% in price (ADR), a 0.54 % increase in occupancy, and a 1.42% increase in Revenue per Available Room (RevPAR). The research also verifies that the influence is across all distribution channels, whether online or offline.
So, the higher number of positive reviews you have will influence a traveler to pay more for your property whereas bad reviews will discourage bookings.
While it might seem like an impossible task there are a number of things you can do to get started. First, know the online platforms important to your guests and where the most influential reviews are posted as you can focus your attention here. Always take the time to respond to each comment personally, whether it’s from the owner, manager or a designated employee and avoid using pre-defined templates. And while no one likes to hear the criticism, always own and respond to negative comments. No matter what it says, good or bad, be professional in your approach and respond to each review in a respectful manner. Remember why you are doing this – better perception equals better rates and better margins!
While these are only a few tactics to include in your revenue management strategy, the above tips can have a far-reaching impact on revenue generation and help increase your bookings.