What Is Hotel Revenue Management? 

Revenue management is the practice of managing hotel room inventory, pricing, and distribution to maximize revenue from available demand. 

Why Is Revenue Management Important? 

The more revenue a hotel earns, the more it has to spend on property upkeep, staffing, and the guest experience. These investments produce happy, loyal guests who write rave reviews and come back – a virtual circle that is extremely healthy for business. 

Inventory Management: What Are You Selling?

Rather than sell rooms on a first come, first served basis, the revenue manager implements stay restrictions to control which rooms are available and on what terms. 

This may include implementing a minimum length of stay (LOS), closing a date to arrivals, or tightening the cancellation policy. The goal is to maximize revenue for all nights, not just nights of high demand.

Pricing: What Rates Will You Charge?

Pricing is one of the most important tasks of revenue management. If your property is priced too high, you will miss out on bookings. If it is priced too low, you will miss out on revenue. The goal is to find the sweet spot that brings in the most revenue. 

An automated revenue management solution manages day-to-day pricing on behalf of hotels, adjusting rates frequently in response to changes in demand, price sensitivity, and market conditions. A dynamic approach helps hotels earn more revenue than static pricing.

Distribution: Where Will Travelers Find You?

Distribution is the process of making hotel rooms available for sale on booking channels. Essential distribution strategies include listing on multiple booking channels, prioritizing direct bookings, and opening and closing channels based on demand.

Performance Tracking: How Will You Know If Your Efforts Are Working?

Hotels use three key performance metrics (KPIs) to track revenue performance, evaluate the success of activities, and determine future strategies: occupancy, average daily rate (ADR), and revenue per available room (RevPAR). 

Additional important revenue metrics include rooms on the books (OTB), pickup, booking pace, booking window, average length of stay (LOS), and cancellation rate. 

How Can You Find Out More?

These are just the essentials of the essentials. To learn more about boosting revenue, check out our free guide today!

Check out the guide “Rev Up Your Revenue: Revenue Management Essentials for Independent Hotels” now.