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Case Study – Exactly How Much Extra Revenue Does a Revenue Management System Make?

Case Study 9 hotels RoomPriceGenie

A Case Study of 9 Hotels

When customers speak to us for the first time about our automated pricing, they often have the same question. It is something like “how much extra revenue will I make?” – and often they are sceptical about the difference that automation can give them.

For any individual hotel, it is dependent on a lot of different factors. But in 2019 we wanted to look at what we help our hotels to achieve on average.

The specific conditions of the pandemic has made year-on-year comparisons difficult since then, but fortunately we were able to compare 2019 to 2018 for a set of 9 diverse hotels in Europe to get an idea of the average performance of our RMS.

Please bear in mind that our product has improved significantly since these early days, so, in that sense, these results would have been higher had we been using our current system.

So what were the results?

$70,000 more revenue per year for the average 19-room hotel 

On average, using RoomPriceGenie gave a 22% increase in revenue across the 9 hotels. That worked out as $5,875 per hotel and $309 per room per month. It showed that our subscription fee is really dwarfed by the benefit.

Case Study with

9

hotels, with 4-55 rooms
Average Increase of

22%

in revenue compared to the same period last year (with increased ADR)
Average Increase of

$309

in revenue per room per month. That's $5,875 per hotel per month

We conducted a study of 9 hotels using our system for an average of 5 months to see exactly the difference using revenue management software can make.

  • Using 9 hotels we saw an average increase in revenue of 22% and an average ADR increase of 4%.
  • After paying just $6 per room to use our software, the average increase per room per month was a huge $309. That’s right, they made over 50 times what they pay us.
  • 8 of our 9 hotels experienced a greater revenue than last year, and the one that didn’t wrote to us to say he was “extremely happy” because we’d helped him to cope with really tough market conditions.
  • And it wasn’t just by selling rooms cheaply to increase revenue. Average Daily Rate (ADR) was higher in 8 out of 9 cases, with an average value of 4% higher.
  • In the 2 hotels that had a revenue manager already, revenue increased on average by 10%

How does RoomPriceGenie increase both ADR and occupancy? Basically, it pushes up the price when you would be getting full anyway, leading to a higher ADR. Then, when you are not doing so well, it reduces the price meaning that you fill up more. The increase in ADR from the former is larger than the decrease from the latter.

 

The next question would be, are these hotels like your hotel?

It’s no use showing our system works with just one type of hotel. That’s why we chose a wide variety of hotels to take part in the study. We’ve broken our sample demographic into the following categories to help understand just how varied revenue management software can be:

  • Hotel type
  • Hotel size
  • Geographical location
  • Does the hotel have a Revenue Manager in place?

Our aim is to show you that revenue management software can benefit a diverse range of hotels and is not limited to a few niche businesses. So let’s take a further look…

  1. Hotel Type

In this group of 9 hotels, 4 are countryside hotels, 3 are city hotels, 2 are seaside hotels and 1 is an airport hotel. Each of these businesses attract a different market segment, and some may even deal with multiple market segments. Each has their own needs and demands on their room pricing. Seeing such a broad-based increase in revenue across multiple types of hotels shows that our approach to revenue-management software can be as dynamic and flexible as you need it to be.

  1. Hotel Size

Whilst the average room number in this study was 19, the smallest hotel involved had a total number of 4 rooms, whereas the largest came in at 55 rooms. With these numbers we were able to look at helping the demographic of hotels that have largely been left behind in recent revenue management tech advances. These are hotels that often don’t have the budget for the expensive and complex systems used by bigger chains. They maybe don’t have the expertise to use the more complex software.

  1. Geographical Region

We don’t want to assume all markets are the same, nor do we only want to test our product in one location based on one market. Of the 9 hotels that participated in the case study, 5 are based in varying locations across the UK and 4 are located within continental Europe. Every destination and every hotel is unique, by ensuring there was a range of locations involved within this study, we are able to show that revenue management software is applicable across the board. As long as you have rooms to sell and those rooms need a price, then your hotel could be benefiting from a revenue management software.

  1. Does the Hotel have a Revenue Manager in place?

Investing in revenue management software does not have to act as a replacement of the revenue manager. RoomPriceGenie is the perfect accompaniment to a human revenue manager – being both relatively inexpensive, and time saving. In purely financial terms, it makes up for its cost many times over with revenue increases.

The idea is simple; a machine can do more in less time than a human can. It can do what the human wants consistently and often. This isn’t to say the human is redundant, merely that, partnered with a smart, learning machine, a human revenue manager is able to make more informed decisions for your business.

In this study, 2 of the 9 hotels already had revenue managers in place. Their businesses were already doing dynamic pricing, but saw this tool as a way to both save hours a day and also improve pricing. These hotels increased revenue by an average of 10%.

 

Conclusion

In conclusion, it is clear that there is something for everyone when it comes to revenue management software. And how much will you make? The answer is still “We don’t know”. But what we can say is that with RoomPriceGenie you are giving yourself the best possible chance in the very competitive hotel markets.

If you have more questions or wish to contact us about a demo call, you can do so here.

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