How sound is your hotel revenue strategy? If you’re like most hoteliers, you’re too busy to constantly revise and improve your revenue strategy. Unfortunately, a stale revenue strategy can leave your hotel missing out on massive revenue opportunities.
Wondering how critical a fresh and ongoing revenue strategy is to your hotel’s long-term success? In this article, we nail down the seven reasons you may need to revamp your hotel revenue strategy right now and how to do it.
What is a hotel revenue management strategy?
Not all hoteliers understand the role of a hotel revenue strategy. Basically, a hotel revenue strategy is the strategy you put in place to grow revenue. To do it right, it takes ongoing hotel revenue management with data analysis.
Beyond sparking new revenue, hotel revenue management involves improving your current technology, revenue channels, data collection, and internal processes in order to clear a wide-open path from top-line cash to your bottom-line profit.
Wondering how hotels are benefiting from hotel revenue management? Here are a few benefits:
- It can boost RevPAR and increase revenue.
- It can lower operational costs.
- It can lift profit for the hotel.
- It can alleviate pressure for overwhelmed employees.
- It allows your employees to dedicate more time to improving guest satisfaction.
What does a solid revenue management strategy include?
The details of your revenue management strategy will depend on your hotel’s specific needs, strengths, and market. However, the most effective revenue management strategies will share these common qualities:
- They’re rooted in internal data: If you want to ensure revenue is snaking through your operation to its bottom line, it’s important to uncover technology inefficiencies, high costs, and other clogs in your revenue streams. That requires consistent analysis of internal data.
- They feed off of external metrics: Ongoing external market data and competitor sets should be guiding your hotel’s efforts.
- They fit your hotel precisely: The best revenue strategies are personalized and designed to fit your hotel’s unique strengths and needs.
Why might your revenue strategy need a refresh?
More than ever, the hotel industry needs to hit the refresh button on their hotel revenue strategies. Here are seven instances where it pays off to reexamine your hotel revenue strategy:
1. The Market Has Shifted
When there’s a major disruption in the hotel market, such as the recent drop in demand due to COVID-19, demand isn’t simply shut on and off. Instead, disruptions often cause long-term shifts in demand, visitor preferences, and behavior. For instance, long after the pandemic is gone, the public is likely to remain focused on cleanliness, gravitate towards outdoor spaces, and look at shared services with a wary eye.
What’s more, it doesn’t take a major event for the hotel industry to shift. Even in seemingly stable times, guest preferences are constantly changing. That’s why it’s important to have a hotel revenue management team that dives into external data, matches it to internal metrics, and is able to predict trends before they’re obvious. By spotting long-term trends early, your hotel can increase RevPAR and jump ahead of competitors.
2. Revenue Isn’t Turning into Profit
Revenue is the fuel that feeds your hotel operation. However, it’s possible to burn up that fuel before it reaches your hotel’s bottom line. For instance, high labor costs or expenses can eat away your hotel’s profit no matter how much revenue you’re bringing in. That’s why it’s important to include operational metrics in your revenue management strategy.
Expert revenue management teams will stack your hotel’s moves up against profit-centered KPIs, such as gross operating profit per available room (GOPPAR). That way you can see which decisions are turning into bottom-line growth and what adjustments you need to make to cut unnecessary costs.
3. Your Tech Stack Is a Mess
In the hotel industry, your tech stack can get out of hand in a hurry. Unfortunately, overly complicated tech stacks can tangle revenue up, and it can get lost along the way to your pocket.
The best hotel revenue management teams will examine your current tech stack and clear the way for revenue to stream in. In many instances, your hotel revenue management team will drive more revenue by plugging your hotel into a global distribution system (GDS). In other cases, they carve a path to more revenue by managing revenue management software or by simply cleaning up your existing programs. Regardless of the route the team takes, it should make life easier on your staff and implement fixes that bring in more revenue.
4. Rate Management Needs a Reset
Because hoteliers are busy, it’s easy to set rates and forget about them. However, reevaluating your hotel’s rate management strategy could help you capture revenue you may otherwise miss out on.
In many instances, hotel revenue management teams can dig into seasonality figures and determine what rate raises will help you make up for dips during seasonal lulls. Another especially handy tool hotel revenue management teams use is compsets and value analysis. By poring over competitor hotels in the area, these teams can determine what rate will keep occupancy high while raising your hotel’s value.
5. Your Customer Acquisition Costs Are High
It doesn’t matter how many visitors you’re bringing in. If it costs a fortune to connect with them, your hotel will end up losing money.
Many hoteliers are struck by high fees from OTAs or other channels. That’s where a revenue management team can step in, shift more visitor bookings to more cost-effective channels, and lower your customer acquisition costs. That means you keep a higher percentage of the bookings you land and revenue jumps.
6. You Want to Maximize Resources
Not all hoteliers realize how much high costs are bogging the operation down. Worse yet, they’re often overlooked when they rise. One example is the especially high labor costs that plague the industry.
Hotel revenue management teams help you treat labor, along with all expenses, as an investment. For instance, remote hotel revenue management teams are able to increase your labor ROI. Rather than overloading current employees or hiring an inexperienced revenue management leader, you get a team of experts with a proven track record of revenue growth. That can lessen the cost of labor and soften the pressure you’re putting on employees.
7. Valuable Opportunities Are Untapped
When hoteliers fall into routines, it’s easy to continue with business as usual. However, that may leave resources untapped. That’s especially true as more and more people operate online.
Revenue management teams locate those new opportunities and find ways to tap into new pools of visitors. At the same time, they should have the marketing skills to boost your online reputation and draw in more guests—along with higher RevPAR.
How can you revamp your revenue strategy and boost RevPAR?
Ready to start boosting RevPAR with an expert revenue management team? RevOptimum is known as the pioneer in remote revenue management. Our team digs into your hotel’s metrics, monitors broader markets, and personalizes a revenue management strategy to your hotel’s unique needs.
Want to see what it’s like working with RevOptimum? Download our checklist, “What to Expect When Working with RevOptimum” and see how our team can increase your hotel’s revenue.
About the Author
Scott Frothingham is the Founder and CEO of RevOptimum, which focuses on Hotel Revenue Management and Revenue Growth distressed Hotel Businesses. Scott is a pioneer of hotel revenue management and has increased more than $2Billion USD in hotel revenue.