The 5 Rs of Revenue Management for Ultimate Hotel Profitability

The 5 Rs of Revenue Management

Originally, the definition of Revenue Management was selling the right product to the right customer at the right time for the right price. Over time, strategies have developed and evolved into an expanded discipline which now includes determining the right channel.

When was the last time you as a Revenue Manager looked at these components for your hotel? Are you analyzing this important data at least semi-annually – even better, quarterly?

With asset managers and management companies focused on profits,

make sure your strategy includes each of these 5 Rs of Revenue Management.

RevPAR projections for 2020

• Asian Hospitality predicts that RevPAR will remain flat
• Hotel News Now reports that both STR and CBRE show occupancy falling slightly and ADR showing a slight increase.

Savvy Revenue Management teams will use creativity

to generate strategies that can see gains in RevPAR and profit in 2020.

Use the 5 Rs of Revenue Management to achieve hotel profitability in 2020

The RIGHT Customer

Target the right audience

Determine who the ideal customer is for your hotel. This will help direct your marketing funds and price your hotel accordingly.

What types of customers stay at your hotel? What demographics define the types of customers you attract? Families? Couples? Multi-generational guests?

 This is important because if, for example, your hotel is not popular with the more mature clientele, it might not make a difference that your AARP discount is 5% or 25%.  Having this information available will help you accurately define your target market.

Where do your customers come from? Review your feeder cities to determine where you should be marketing.  If most of your travelers are withing a 5-hour driving radius of your hotel, it would be wise to target guests in that area. Perhaps offering a special rate for guests in the tri-state area or a specific zip code would be effective.   If your hotel attracts guests from certain countries, you could have a few amenities that they would find beneficial.

Booking windows also vary based on clientele and feeder cities. Knowing when each type of business books can help determine the most profitable business to attract and the best time to promote different types of business.

On your website, increase conversion by highlighting the attributes of your hotel that will appeal to your ideal customer. If your hotel attracts families that are in the drive-in market, you could promote parking, family activities in the area, breakfast or other options that would appeal to families when they stay with you.

Booking windows also vary based on clientele and feeder cities. Knowing when each type of business books can help determine the most profitable business to attract and the best time to promote different types of business.

Another step in determining the right time is that while most hotels are seasonal, each market has very different needs in each quarter. For example, Minneapolis is not busy in Q1, while Phoenix is in high season.  Offering promotions based on seasonal needs can help you attract the right customer.

The RIGHT Price at the RIGHT Time

Unconstrained demand forecast and high/low time considerations

Unconstrained Demand forecast looks at how many rooms you could sell if you had unlimited inventory. This is different from a monthly operational forecast.

To create an unconstrained demand forecast, consider how many rooms you have sold on a specific date, and how many rooms you could sell for that date.  Creating a demand forecast for the year will help determine a marketing calendar to maximize the return on marketing dollars spent.  This also helps synergize revenue management and marketing so they are working together to create a unified plan.

Each hotel should have a list of the following regarding their competitors:

• what amenities they have at the hotel
• what specials they have in place each day
• who their top accounts are

This should be updated regularly, at least twice a year or as you notice a shift in your business.

Shop yourself

Now that you have detailed data on your comp set, do a thorough shop on your own property. How do you appear? Is all the information correct on your sites as well? Evaluate every area of opportunity and implement strategies accordingly.

Review the reviews

Reading your competitors’ guest reviews will help you determine how to sell against them as well as provide insight to what is happening at that particular hotel. It is imperative that you also respond to your own reviews – both the positive and the negative ones – with genuine, thoughtful responses. This opportunity for interaction will go a long way toward developing a bond with your guests and loyalty to your property.

If most of your business comes from the OTA channel, but has a cost of 20% associated with it, it might be beneficial to try gaining more direct bookings with lower cost acquisition.

A Profit Launch Assessment can evaluate how your business is booking and the cost associated with this business. This helps you determine your most profitable channels.

This should be updated regularly, at least twice a year or as you notice a shift in your business.

Reading your competitors’ guest reviews will help you determine

how to sell against them as well as provide insight to what is happening at that particular hotel.

Who, How, Where, When & Why of 2020

Whether 2020 proves to be a challenging year or smooth sailing, properties need to utilize every tool available. If used properly and frequently, your hotel will stand above the rest.  Narrowing down who your customer is, how they are booking at your hotel, where they are coming from, when they are coming and why they should choose your hotel are great steps in helping your hotel gain share over the competitors.