There are no excuses for not adopting revenue management

Revenue management is an advanced approach to flexible price management, aimed at maximising revenue. Originally developed in the airline sector, the practice has become a well-established standard in the hotel industry too. Yet many hoteliers still resist adopting these techniques, often because their understanding of the concept is incomplete. It is frequently and wrongly taken to be a method for dumping rooms cheaply in order to raise occupancy, at the risk of cheapening the property’s image. Another source of resistance is the perception that it is complicated, particularly for those who have used fixed rates for years. In reality, revenue management does not have to be complicated and, applied correctly, it does not involve selling rooms off cheaply — on the contrary, it can significantly improve a hotel’s reputation.

The drawbacks of fixed pricing

• Lost potential revenue: without dynamic rate management, hotels risk selling rooms too cheaply in periods of high demand or, conversely, leaving them unsold in low season.

• Difficulty competing: in an increasingly competitive market, hotels that do not use revenue management tools struggle to position themselves effectively and to stand out from their competitors.

• Lack of flexibility: fixed rates make it impossible to adapt quickly to market changes, such as special events, economic downturns or shifts in guest preferences.

• Decisions based on gut feel: without data and analysis, pricing decisions are often taken on the basis of instinct or past experience, with a greater risk of getting them wrong.

The advantages of revenue management

• Higher turnover: by setting optimal rates, hotels can increase average revenue per room and maximise occupancy.

• Better use of resources: revenue management lets you optimise room usage, avoiding both overloading and empty rooms.

• Greater guest satisfaction: by offering rates tailored to guests’ needs, hotels can increase loyalty and improve their reputation.

• Better-informed decisions: thanks to data analysis, decisions about rates and product distribution are taken more deliberately and more strategically.

Getting started with revenue management

It is natural to assume that gathering data, analysing it and managing prices day to day might become a full-time commitment requiring specialist skills. As a result, many hoteliers fear they will have to hire someone dedicated to it, which is often not sustainable for smaller properties. In these cases, the most sensible options are to work with a specialist agency or to invest in training your own staff.

Although it may look like a costly investment, engaging an agency or an external revenue manager can bring significant financial benefits. Implementing revenue management effectively can, on average, increase turnover by 5–20%, with the revenue manager’s fee tied to the results achieved. Typically the service involves a base cost plus bonuses linked to hitting revenue targets, which still come to less than the increase in income.

A sound alternative is to invest in training your own staff. Someone in the front office or back office, for instance, could acquire a revenue manager’s skills through courses and specialist reading. In many properties, whoever manages prices also has other duties, such as reception. This route can save money, but it needs to be handled carefully. A receptionist who also takes on revenue management should be incentivised against revenue targets, since that not only motivates them to improve results but makes them more engaged in their main duties as well. One approach is to pay their base salary and add bonuses tied to hitting revenue targets, so that their performance is rewarded.

Conclusion

In conclusion, implementing a revenue management strategy is not merely advantageous but crucial if you want to stay competitive in the hotel sector. Whether you decide to train your own staff or work with outside professionals, what matters is acting proactively. The first step might be an assessment of your current pricing strategies and performance, followed by adopting data analysis tools and revenue management software. Setting clear revenue targets and monitoring results continuously lets you adapt quickly to market dynamics, delivering not only increased revenue but an improvement in the hotel’s reputation and competitive position. Approaching this process with a long-term strategic view is the key to sustainable, successful results.