Simplified Revenue Management Methodology

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Simplified Revenue Management Methodology

In this article, I will try to use several visuals extracted from my Revenue Management Training Programme workshop to be able to give you a brief tour on Revenue Management, key stages, processes we use and models to apply for a successful implementation of revenue strategies.

I will use this article as a base layer of Revenue Management and due to the depth of the subject, I will share several articles on individual areas to shed a light and explore these areas further.

Revenue Management is a complicated process as there is a lot of information to digest, analyse and manage while focusing on tactical short, medium and long-term goals. It requires looking at previous year/period statistical reports, knowing what is going on in the area, keep an eye of competition, reviewing daily occupancy, pick-up and watching the evolution of key indicators to make sound decisions on inventory, rates and restrictions.

You can make all those things if you have a good structure of segmentation, the right control of bookings and accurate past and future projection reports. Ideal revenue management has four levers; inventory, demand, rate and distribution.

Four Levers of Ideal Revenue Management

The true potential of revenue management relies on mostly forecasting, planning and strategy which collaborates its efforts with an efficient sales and marketing plan. Therefore, you have to use 5 key stages of Revenue Management; Data recollection, Interpretation and demand forecasting, Strategy development, Strategic Business Mix implementation and continuous process of Analysing the Results.

Effective Revenue Management Processes
Five Stages of Revenue Management

Our main goal as Revenue Management professionals is to sell as much as possible all your active inventory rooms in your hotel at the highest price.

Revenue Management is Selling the right room to the right customer at the right time and the right price

Where do we start? Before you do anything in revenue management you need to;

  • Know our Product

  • Know our Customers

  • Know our Competition

Therefore, you need to leverage your room inventory by clearly identifying customer needs and then translate this valuable information into actions that truly differentiate your hotel from its competitors and ultimately optimize revenue. This is what we call, Product Definition Process.

Revenue Management - Product Definition Process

Then you need to analysing and reassessing who your primary and secondary competitors to understand who you up against and how you can differentiate yourself from the rest from a guests’ perspective. Once you properly define your competitive set, you need to be able to optimally set prices, create a hotel positioning plan and start measuring your performance against your competition.

Revenue Management - Competitive Benchmarking Process

We then need to move to Strategic Pricing Model which requires a full understanding of strategic and tactical pricing, fair pricing, the relationship between rate parity and rate integrity. We need to be able to analyse index results to determine price potential, using discount and fencing tactics to drive RevPAR by optimise pricing in each segment and ultimately achieve desired revenue and bottom line results.