Best Practices and up to the minute news on Customer Experience Management and Service Excellence
Best Practices and up to the minute news on Customer Experience Management and Service Excellence
Your rooms might be full but that doesn’t mean you’re taking advantage of all your potential revenue streams. With proper revenue management, you can fix that.
Hotel revenue management means analyzing and predicting guest spending while adjusting your costs and availability accordingly so you put the most optimal prices in place. Essentially, it’s simply running the math on how you can increase your overall revenue.
According to STR, which analyses the hospitality market, the idea of revenue management sprouted in the airline industry. They started using tricks like dynamic pricing and dividing customers into groups to sell more flight tickets. Their practices can easily be applied to the hospitality industry.
Revenue management in hotels is important for several reasons. It allows hotels to make the most of their pricing strategies and increase their overall revenue. By carefully monitoring and analyzing market demand, competition, and customer behavior, hotels can adjust their prices dynamically to put in place the highest possible value for their rooms and services.
It can be broken down into a few categories:
Let’s expand on that.
Dividing up your customer base means identifying distinct groups of travelers who visit your hotel and changing your approach to meet their specific wants and needs.
Demographic factors like age, gender, and family status, as well as the purpose of the trip like business, family vacations, over-night trips, etc., as well as the duration of their stay, guest loyalty (are they new or returning?), and how they booked the trip (TripAdvisor, your website, onsite, etc.) all play a role in guest segmentation. By understanding these categories, hotels can offer customized experiences and targeted promotions to different customer groups through different channels.
Demand forecasting is one of the more critical aspects of revenue management, as customer demand is affected by various factors such as seasons and local events.
It involves analyzing historical demand data and considering current and future events across your pinpointed customer bases to predict fluctuations in demand. This allows hotels to develop effective pricing strategies and select the appropriate booking channels mentioned earlier, it also allows you to create enticing promotions and implement targeted marketing.
Of course, a hotel’s main “inventory” to take stock of is room availability. They need to implement demand forecasting techniques to be prepared for changes in customer demand across different time periods. By analyzing previous data, market trends, and upcoming events, hotels can make educated decisions regarding room availability and how to price accordingly.
To avoid empty rooms– “unsold inventory” –, hotels can try a trick called overbooking. This is where you’ll intentionally accept more bookings than the actual room count, anticipating potential cancellations and no-shows. However, you’ll have to be very careful about how to handle overbooking to avoid any guest frustrations and manage your reputation.
The prices you set for your hotel play a big role in attracting guests. Finding the ideal rates for your inventory is the essential trick to maximizing your hotel’s revenue. This is why it’s crucial to dive into market analysis, understand your customers, and track booking trends. This way you can craft the perfect pricing strategy.
There are two main pricing tactics: dynamic pricing and open pricing. Dynamic pricing involves regularly changing prices based on supply and demand. Open pricing means you have different prices based on your client segments, where your guests book from, and when they book. Whichever method you choose, try to set your rates well in advance. This ensures you’re making the most of bookings placed by customers way ahead of their trip dates.
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