Revenue management is an important aspect of running any accommodation business. For many it can be hard to know where to start. Others may find it difficult to find the time to put together let alone carry out a robust strategy for the year and beyond in advance.
So, why should accommodation owners care about revenue management, and what can accommodation owners do to improve their revenue management and therefore profitability? Jody Sharratt, Founder of Rooms Online explains…
WHY IS REVENUE MANAGEMENT IMPORTANT FOR ACCOMMODATION OWNERS?
Accommodation operators have a finite revenue earning potential, and once a room is sold, or the property is full for the night, they’ve reached the maximum for that day.
Simply increasing rates because it’s traditionally a high season or lowering them because it’s a low season isn’t necessarily going to ensure you’re maximising the potential revenue. Accommodation providers need to look at what’s happening in town, look at forward bookings, think about what traditionally happens at the particular time of year and make a strategic plan.
- Consider booking trends and use historical data to make sound decisions
- Invest time to plan ahead and continually monitor your room inventory
- Leverage your most successful booking channels
WHAT ARE SOME COMMON MISTAKES YOU SEE WITH ACCOMMODATION OWNERS AND THEIR REVENUE MANAGEMENT?
Accommodation providers tend to stick to what they’ve always done when it comes to rate setting, and this is generally whatever the previous owners of the property have done, or what competitors are doing. Often they’ll only look a few weeks ahead, but they should be looking months into the future and planning, things happen quickly and you want the best rate at the right time, every time.
They often worry too much about what their competitors are up to – which leads to price wars. In peak demand, properties often think that if they’re full and the ‘No Vacancy’ sign is up that they’re doing well.
A savvy revenue manager will challenge this scenario as follows;
- Is the goal to fill to 100% occupancy, or get the best possible overall room revenue and ultimately make more money?
- Have they maximised the opportunity and achieved the best possible average daily rate, or did they perhaps fill too easily?
WHY DO SOME OPERATORS SHY AWAY FROM DYNAMIC PRICING?
Traditionally, all accommodation providers offered fixed rates. The next trend was to offer seasonal fixed rates, for example high, low or shoulder rates. Often premium rates will be charged for events, however aside from this exception rates very rarely deviate from the fixed rates in place.
When a turn in technology meant operators could start changing rates in an instant or ‘real time’ via their channel manager to multiple booking sites, we saw clever operators start to take advantage of this with the introduction of dynamic pricing. Many operators now focus on yield as a key part of their overall business plan – well, those that have time and expertise to do so.
Many owner operators or managers lack time to plan ahead when they have things to do right now, and some simply inherit the business and habits from previous owners. For these operators it is often a matter of ‘you don’t know what you don’t know. Others shy away from dynamic pricing to keep their guests happy, and some don’t want to be seen to rip people off. The most important things to remember is that you can still dictate your highest rate without pushing the limit too high, and that nothing is set in stone forever.
With 12 years’ hotel reservations/revenue management experience, Jody came up with the idea for Rooms Online during her five years working for an online travel agent (OTA). She realised small accommodation operators were often new to the industry and they often felt ‘alone’. They had no neutral adviser they could turn to for advice on pricing, promotions, or communications. They also had very little time to do everything.
Jody appreciates how hard small accommodation operators have to work, and she thrives on growing their revenue so they enjoy more reward for their hard work. When she’s not working you’re most likely to find her rescuing, rehabilitating, and fundraising for, the feral cats of Wellington.