BookingSuite loves answering questions. After all, it’s our job to make complicated things simple. In this installment of our FAQ series, we dive into the topic of revenue management.
Q: What is revenue management?
A: Businesses are meant to make money. However, revenue doesn’t grow by accident. In the lodging industry, revenue management is the strategic analysis of guest behavior in order to predict future supply and demand.
In other words, revenue management takes into account factors such as a property’s historic occupancy rates, local events, weather, and competitor rates. The strategy considers these factors to optimize future room rates for maximum profit. Properties can also include amenities such as restaurants, spas, and events spaces into revenue management strategies.
Q: Don’t Property Managers and Revenue Managers know best how to set room rates?
A: People working on the ground at hotels and properties are incredibly valuable resources for pricing. However, a Manager’s final decision on pricing should be informed by data.
Q: What does a PMS have to do with revenue management?
A: Property management systems (PMS) are not only valuable for day-to-day operations, the systems also provide reliable records of a property’s historical pricing and occupancy rates. Therefore, revenue management should always be informed by data from your property’s PMS.
Q: How can people interpret PMS data?
A: It’s possible to study and track your PMS’s historic data in order to set room rates. Many people rely on a combination of manual research and keeping records in notebooks or Excel spreadsheets. However, this process is extremely laborious and time-consuming.
Q: What are the software options to automate revenue management?
A: Revenue Management software uses computer algorithms that factor in a property’s PMS data, competitor pricing, weather, local events, online reputation, and more. Industry-leading Revenue Management software include BookingSuite RateManager, Duetto, and iRates.
Q: What does “Open Pricing” mean?
Open Pricing describes a revenue strategy that emphasizes flexibility in a property’s rates. Traditional pricing models base rates off of a Best Available Rate (BAR) and set all room types in fixed-relation to this rate.
An Open Pricing model, on the other hand, allows you to forecast and set rates that are not necessarily based on fixed intervals. The model becomes especially important during peak season when fixed rates might be too low in comparison to high demand.
Q: Should I use revenue management software?
A: Yes. Revenue management software can help properties of all sizes and any ADR. However, it’s essential to find the right software for your property. Ask yourself the following questions as you consider your revenue management needs:
- Do I need to know my competition’s rates?
- Would my property benefit from an Open Pricing strategy?
- Would I like to segment my customers? Do I know who travels to my property? Which type of traveler spends the most at my property?
- Am I able to easily track my ADR, occupancy rates, and RevPAR? How much time does this analysis take me per week?
- How far in advance can I reliably set rates right now? How far in advance would I like to set rates?