Exactly How Much Extra Revenue Does a Revenue Management System Make? A Case Study of 9 Hotels

When customers speak to us for the first time, they often have the same question. It is along the lines of “How much extra income will I make if I use your revenue-management software?”.

To which the only fair answer is “We don’t know”. It depends on so many things. However, we do have a rough rule of thumb… 

We say that, if you didn’t have a revenue manager before, using our software should make a big difference. Maybe 15% more revenue on average. Often hotels find this difficult to imagine. For a 20 room hotel this could be $60,000 per year. 

But what if you are a revenue manager, and you use this tool to crunch numbers and implement your strategy? In this case, we would expect maybe 7% more revenue. This is because, even though you are doing a great job already, we can do the calculations so much more often than you can. And we also use the expertise of other revenue managers from your competitor hotels to help you.

These rule-of-thumb numbers came from our experiences with clients, but we had never conducted any systematic study before. As statistical types, we know that anecdotes are great, but data is better. So we decided to make a study of 9 hotels that had standardised reporting and allowed us access to their numbers. 

And do you know what we found? Our results were even better than the rule-of thumb. 

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 and month
We charge just

$6

per room per month.

So what are the details of the study?

 
Here at RoomPriceGenie, 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. And, if we do say so ourselves, it’s looking good: 

  • Using 9 hotels we saw an average increase in revenue of 22% and an average ADR increase of 4%. These were skewed by some really great performers, but taking median values give an average revenue increase of 15%. 

  • 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? 

Sample Demographic 

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 
  • Revenue Manager? yes/no

Our aim is to show to 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.

2. 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. 

These small to medium sized hotels were losing out while the chains were using the latest expensive software. 

RoomPriceGenie’s revenue management system has specifically been designed with this gap in mind; providing a service that is tailored towards small-to-medium sized hotels by offering price suggestions that can be automatically updated across your various channels. It is designed without a need for huge amount of internal data and uses different factors in and around your hotel to help optimise your pricing and increase your revenue. In this sense, the size of the hotels involved in this study, offer evidence that, with the right revenue management software, your hotel could be competing more comfortably and confidently with the larger businesses around you who are already benefiting from complex revenue management.

3. 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. You don’t have to fit a certain criteria; as long as you have rooms to sell and those rooms need a price, then your hotel could be benefiting from revenue management software. 

4. Revenue Manager

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. 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%.

It’s hard to argue that making more income and saving time isn’t a huge help to any revenue manager. 

Check out our article (RM vs RM software article) on revenue management software vs revenue managers to learn more about how software and a manager can be the harmonious solution your hotel needs. 

Conclusion

In conclusion, it is clear that there is something for everyone when it comes to revenue management software. Don’t miss out on making a huge difference with just a little effort, and if you’re still a little confused, you can go back to basics with Revenue Management Software for Beginners.

And how much will you make? The answer is still “We don’t know”. We can’t promise that you will get the same results as the hotels in this study. 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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