Enhance Hotel Profitability with Revenue Management

by usuario4 usuario4 - 3 July, 2017

Enhance Hotel Profitability with Revenue Management

A 100% hotel room occupancy doesn’t have to be the quickest route towards hotel profitability.

There are certain situations in which a hotel can have an occupancy of 70%  and still be as profitable or even more so than a hotel with an occupancy of 100%.  

According to a  study by STR, a parent company of Hotel News Now, the optimal level of occupancy at which hotels yield maximum profits is between 75% and 85% or more than 85% when there are increasing costs that begin to have a negative impact on profit. 

The Revenue Management department must understand how to find the right level of occupancy and rate to achieve peak profitability. This level is expected to be higher for luxury hotels due to product costs and lower for midscale hotels since they offer a more limited service.  A good understanding of this information will greatly help in your hotel’s management and decision making, especially with important tasks such as pricing, promotion and discount campaigns, or with the closure of certain channels at specific times of the year. According to a  report by Kalibri Labs , a data analytics firm, in 2015 the revenue capture declined .4%, even after all customer acquisition costs were paid for. To give you an idea of the importance of these small margins, there was a 83.2% drop in revenue capture in 2014 and a 82.8% decline in 2015, representing a total of $600 million in lost revenue. 

Gráfica mercado 2014 - 2015

Reasons why RMS is key in hotel management

The most cost-effective way of maximizing your hotel’s profitability doesn’t need to involve investing several million euros or dollars in property. This is more than a matter of investing in data. Revenue Management Systems (RMS) help predict demand and therefore improve hotel management, track consumer behavior and maximize revenue associated with optimizing the booking profitability. This analysis is possible with sophisticated algorithms that facilitate customer-centric decision making and integrate the hotel’s data. Hence, it’s possible to use the acquired market intelligence to predict demand and make pricing recommendations to help hotels maximize their revenue and encourage guest loyalty. A hotel room rate can fluctuate depending on the market and supply/demand.

Small percent improvements can have a huge impact, both positively and negatively. A more systematic or detailed revenue management strategy, that uses data sets to guide an open pricing approach, will have a direct impact on profit.

Don’t risk losing out on revenue opportunities. Beonprice helps hotels achieve an average of 11% RevPAR growth when compared to the hotels’ results achieved prior to using its RMS.  

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