Hotel Revenue Management Guide PDF

Difference Between Yield Management and Revenue Management

The concept of revenue management in hotel industry is different from yield management. The latter focuses on maximizing revenues from a time-limited and fixed inventory base, such as hotel rooms through the adjustment of prices based on seasonality and demand. On the other hand, revenue management is a broader and more strategic approach that covers all aspects of organizational revenue generation and income streams along with customer behavior.

To take an example, yield management may focus on optimizing room rates depending on demand, while revenue management will cover all revenue streams like rooms, amenities, spa, F&B, and services. Thus, yield management is a core aspect of the bigger hotel room revenue management strategy.

Metrics Used in Revenue Management

There are several metrics that contribute towards revenue management strategies, including the following:

• ADR (Average Daily Rate)- This metric helps track the average revenue earned from each occupied room on any given day. This will enable hotels to make informed decisions regarding hotel revenue management.
• RevPAR (Revenue per Available Room)- This combines occupancy rate and ADR to offer an extensive picture of both revenue and room sales. You can calculate this by multiplying the ADR by the occupancy rate.
• Occupancy Rate- It is a metric that indicates the percentage of available hotel rooms which are occupied in a particular period, offering insights into demand for rooms and forecasting occupancy levels in the future.
• GOPPAR (Gross Operating Profit per Available Room)- You can use this metric to track the gross operating profit of a hotel per available room, considering all revenue streams and also operating costs.
• MPI (Market Penetration Index)- It compares occupancy of a hotel or its revenue share to its competitive set, enabling a better understanding of market positioning and also identifying areas for further improvements.
• ALOS (Average Length of Stay)- This is a metric that measures the average number of nights spent by guests at the hotel, helping you get insights into the patterns of booking and prospective opportunities for maximizing room utilization or up-selling.
• TRevPAR (Total Revenue per Available Room)- You can get a more holistic picture of overall hotel-driven revenue including all streams beyond just room sales.

Check the most essential financial hotel reports in detail here.

Revenue Management Strategies

To build the right hotel revenue management system (RMS Hotel), a few strategies are essential indeed. They include the following:

• Customer Segmentation- One of the most crucial revenue management strategies is guest/customer segmentation. This helps you understand the type of guests that are available to you and you can tailor your marketing strategies, pricing, and loyalty programs or services accordingly as per their specific segment. It is only possible once you understand the unique customer behavior, preferences, and characteristics of every guest segment to allocate resources, optimize room rates, and personalize experiences for driving loyalty and repeat bookings.
• Pricing Strategies- Working out the right pricing strategy is essential, considering data analysis, identifying booking patterns, and interpreting trends. Daily pricing or length of stay pricing models are worth considering along with dynamic pricing blueprints as well. Creating forecasting models is also essential for predicting demand as per seasonality and other historical patterns, and setting prices based on raising rates as availability drops and demand goes up and vice versa.
• Market Segmentation- This is another vital part of revenue management, enabling differentiation between travellers visiting your property and creating individual strategies for each of them accordingly. Some data parameters may include the reason for stay and demographics, gender, etc.
• Distribution & Bookings- Setting up the right distribution channels for your property is a vital aspect as well. This includes OTAs and other platforms along with direct bookings. You can also come up with marketing initiatives like loyalty/rewards programs, mobile-exclusive promotions, walk-ins, corporate bookings, and group bookings, to name a few.
• Budgeting & Demand Forecasting- Making a demand calendar is also crucial before setting the budgeting plan. Most properties forecast for the coming 30 days and then every week for the next 90 days. You’ll have to track RevPAR from the last year, groups/events, demand level indicator last year, holidays, and higher demand indicators.
• Hotel Revenue Analysis- You can benchmark against rivals in the segment for performance evaluation, including aspects like price, location, service level, product, distribution channel, etc. Average Rate Index is a helpful metric in this case.

What is Dynamic Pricing?

You’ll have to ace the dynamic pricing game to maximize your hotel revenues. This involves real-time room rate adjustments based on multiple factors like occupancy, demand, competition, market trends, and so on. Advanced revenue management software (RMS Hotel) usually helps accomplish this task, enabling you to change prices multiple times a day in response to evolving market conditions.

Some of the advantages include optimal prices to match demand and higher revenues along with improved occupancy in lower periods through lowering prices in these times. Dynamic pricing also enables better cost management for hotels.

Revenue Management System (RMS Hotel)

Creating a hotel revenue management system is a must to scale up revenues going forward along with optimizing your occupancy levels in turn. Here are some key aspects related to a hotel revenue management system (RMS Hotel).

• This software helps hotels optimize their pricing and inventory for revenue maximization, using data analysis, market insights, and algorithms.
• It helps adjust pricing on a real-time basis while selling rooms to the right guests at the right time while enabling higher occupancy rates and profitability simultaneously.
• These systems also analyze historical booking trends and market supply along with external market data and competitor pricing. They also predict future room demand, while dynamically adjusting rates based on several factors.
• Inventory allocation is also done strategically, while managing pricing and availability throughout various distribution channels.
• RMS can help optimize inventory and pricing to maximize RevPAR and optimal occupancy along with accurate forecasting and lower costs. It also helps personalize guest offers while automating and streamlining multiple tasks and responding to market changes.

Transform Hotel Revenue Management with APerfectStay

Hotel revenue management can be transformed with the help of aPerfectStay. It gives you a wide range of integrations with OTAs and brands along with cutting-edge revenue management facilities. Some of the systems available in the RMS category include room price genie, elastic hotel, PriceLabs, PRICEPOINT, and LYBRA ZUCCHETI. You’ll find an extensive property management solution, with help for streamlining bookings, managing daily operations, enhancing guest experiences, and more. The PMS is trusted by more than 500 hotels and rental property owners globally (aPerfect PMS) while there is aPerfect Channel Manager for managing bookings.

You will also find aPerfectConcierge for boosting guest experiences and aPerfect Housekeeping for automating workflow management. Another advantage is aPerfect Reporting & Insight for real-time visibility into the performance of your property while aPerfect Finance & Payments is another plus point, along with a marketing suite, marketplace, and more. You can also find an immensely helpful revenue management in hotels PDF that you can download for free. Here’s to elevating your revenues with strategic and effective hotel revenue management system and strategies.