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8 Mistakes to Avoid in Your Revenue Management Strategy

by Nuria García

8 Mistakes to Avoid in Your Revenue Management Strategy

Often there’s a fine line between success and failure in a marketing action and pricing strategy.


Your hotel’s ability to make an impact will depend on small details. Focusing on your hotel’s bottom line will help you take effective measures. During lean times it’s more important that your business have a strong vision and offer a good return on investment (ROI). Often, however, this vision is lost in large corporate structures. That’s why it’s important to gauge the effectiveness of your Revenue Management strategies using key performance indicators (KPIs).


A great way to avoid making errors, especially errors that could have a negative effect on your hotel, is to understand how these mistakes occur in the first place. Of course, there are some mistakes you simply can’t avoid. Some mistakes can occur due to a lack of experience or having to deal with constant technological changes that make it difficult to have full control all the time. On the other hand, work teams can play an important function in minimizing errors and being more efficient by reviewing each other’s work. Additionally, automation has become an important part of revenue management, making it easier for humans to be back-seat drivers. Market intelligence has evolved in way that it can make decisions for us. However, automation does not eliminate the need for the human factor, and only the right balance between the two will make for a successful revenue management strategy.


One way to reduce human error is by identifying which mistakes your hotel is most likely to make. Here are 8 things you should do to boost your hotel’s profitability:


  • Understand channel costs. You can’t manage your hotel’s revenue and not take into account acquisition costs. Otherwise, you won’t know whether a reservation is profitable (or not) to your establishment. Not understanding this metric will prevent you from choosing the most profitable channels, and ultimately hurt your hotel’s bottom line.


  • Measure the impact your pricing strategy has on demand. Price variations affect traveler perception of your business. To avoid devaluing your product, it’s important to measure the effect your pricing strategy has on demand. Otherwise you run the risk of distributing to the wrong customer segment.


  • Only sign contracts that generate necessary returns. When it comes to making price agreements with tour operators, be careful when signing contracts that are based on old models. Instead, analyze customer profitability to determine how convenient it is to maintain certain rates at specific times of the year and attract travelers that are profitable to your hotel.


  • Don’t skimp out on HR. Many cases, revenue management departments don’t have enough resources to properly manage. So, hiring the right people for the right job is essential to your hotel’s success, especially for your revenue management department. Not doing so, could jeopardize your hotel’s effectiveness or even force you to hire more personnel than are actually needed.

  • Avoid making assumptions about demand. Although revenue management uses historical data, you mustn’t neglect current or future events that could affect your hotel establishment. If Revenue Managers want to maximize results, they must take advantage of those opportunities generated recurrently and occasionally.


  • Don’t obsess about filling rooms during valleys. If hoteliers obsess about only filling rooms during low occupancy periods, then they won’t dedicate the time necessary to maximize revenue during high demand. Finding the right balance is key for a successful revenue management strategy.

  • Understand that demand fluctuates according to price. No one can claim with absolute certainty that a fall in prices will be associated with an increase in demand. The customer mix may not be sensitive to cut-rate prices or may perceive a lower quality with lower rates. Therefore, the best option would be to analyze demand and monitor how demand responds to price or product variations.



  • Focus on your hotel’s bottom line- maximize profits. All too often, we hear that Revenue Managers must increase revenue through hotel room occupancy or specific ADR targets. However, we know that this approach is not completely right.  A hotel’s main focus should be its Net RevPar or GOPPar (gross operating profit per available room).



It’s important to reflect on errors your hotel is likely to make to avoid making them or be able to to solve them when they happen. Doing so will help improve your hotel’s overall profitability.

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