Objective: Maximize Profitability with Revenue Management
A good indicator of a great revenue management strategy is achieving positive results. Good results should encourage hoteliers to continue improving their product and distribution strategies.
According to the “Expectations 2017: The Experience Revolution” report published by Deloitte in collaboration with Beonprice, the following results were obtained:
The hotel price index increased by 10.5% in the annual aggregate of the last two years.
The highest prices occurred in the high season with price increases of more than 15% in July and August, when prices in 2014 and 2016 were compared.
An average increase of slightly above 10% was seen in prices for all categories.
The hotel industry’s constant quest for excellence leads to a continuous improvement in profitability and in the added value provided to travelers. It is clear that the main focus of hotels is to improve the pricing results associated with an increasingly demanding and better informed traveler. The role Revenue Managers play in hotel revenue management is key for optimizing results. The continued evolution of the revenue management department is quite evident. Revenue management is moving towards more dynamic approaches that can adapt better to the market’s changing needs. Here are 3 paradigm shifts Revenue Managers will have to jump on board with if they want to adapt to changing times and demands:
Tactical Focus vs. Strategic Approach. The traditional approach of revenue management that focuses on day-to-day operations is being superseded by a more strategic approach that provides a more global vision of the market. Before, pricing decisions were solely made on human judgment and were based on intuition, whereas now, Revenue Managers count with automated pricing that is more efficient, accurate, and allows for a broader market perspective.
Reactive Management Style vs. Proactive Management Style. The reactive approach in revenue management involves making pricing decisions based on the information obtained from the past. This approach is outdated because Revenue Managers are not able to make the most accurate pricing decisions since they count with insufficient and limited parameters. In a constantly changing market, a more transversal and an all-encompassing pricing strategy can be obtained by analyzing the market situation with parameters compiled in the present, past and future. By incorporating more dynamic strategies and redeveloping objectives, hoteliers can be more competitive in the market.
Single Departments vs. Cross-Departmental Collaboration. Isolated departments that are only given specific functions and that do not interact with other departments belong in the past. Lifelong learning and continuous collaboration between departments allows for a global vision of the product and a realization of pricing strategies in a more significant way. The concept of pricing is a transversal parameter that affects all departments, therefore, it’s important that departments collaborate to achieve the best results.
Although concepts such as added value or facilitating experiences have already become a standard, Revenue Management is still fairly new for many hotels. It’s important to analyze your hotel’s situation and determine how revenue management can help you meet your goals, especially with the growing need that revenue management poses in an increasingly innovative, dynamic and disruptive market.