Revenue Management, Yield, and Dynamic Pricing Explained
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 potential for that day.
Effective revenue management is achieving the best possible yield each day. It’s achieving the best possible average daily rate (ADR) and occupancy percentage based on booking lead time and demand.
This is a balancing act between focusing on occupancy and selling quickly at a lower rate than what could otherwise be charged, and charging too high a rate and missing out on potential occupancy. Getting the best possible yield is watching the market demand, understanding your lead time, and changing rates accordingly to yield yourself the best ADR and Occupancy.
Good yield can only be achieved by having a strategic dynamic pricing plan in place. Properties that have fixed/static ‘High/Low’ rates are not fluctuating their prices according to the demand.
In peak times, this means they run the risk of filling too easily at a low rate. During low demand, they run the risk of missing out on leveraging OTA promotions which play on perceived value benefits.
How will listing and pricing dynamically with OTAs affect my direct bookings?
It’s no surprise that today’s guests are digitally savvy. Travellers of all age groups and nationalities spend a significant amount of time online, and researching accommodation options is no different.
Being prominent online in the current market is an absolute must. This includes having listings with key OTAs, all of which invest a great deal to get audiences looking at your property listing with them.
We do however always encourage our customers to also consider ways in which they can encourage repeat direct bookings, and other marketing channels. It’s important to not rely on one marketing channel, but rather leverage a few key channels to the best of your ability.
Rooms Online simply works with our customers to help them take advantage of OTAs as one key marketing channel, to make OTAs work for our customers better.
The dynamic rates we set online can then also be used as the ‘Best Available Rate’ of the day for walk-in’s or phone enquiries, or a provider may choose to quote lower than the online rate to encourage the direct booking conversion.
Which Rooms Online package is right for my business?
By employing our services, operators have peace of mind that somebody who is experienced with OTAs and revenue management is looking after them. We take over all dealings with the OTAs which saves our customers a lot of time and frustration, and lets them get on with managing the property.
We also gain access to their channel manager and put in place a well thought out dynamic pricing strategy for them, helping them to increase their revenue. Dynamic pricing makes sense for all businesses, whether large or small.
Starter Service – This service is for small properties with less than 5 rooms that are not online yet. We get them listed in all the right places, for a small fixed one-off cost.
Classic Service – This service offers a complete audit and update of all OTA listings and promotions, and ongoing weekly checks and revenue management of dynamic pricing strategy via key OTAs.
Premium Service – Just like Classic, only better. With this service, you get twice-weekly rate audits and updates. This suits properties competing with the Hotel operators who already have a revenue management plan, or properties in high demand markets that might require more frequent checks of inventory and rates management.
I am interested – How does it all work?
The first step is to contact us on 0800 676 667 or email firstname.lastname@example.org
We will have a chat regarding your property, your market, your current challenges and areas you’d like help with the most. From there, we provide a no-obligation quote. If you’re happy to try us out, we just ask for a minimum 3 month commitment, we don’t do any long term contracts.
In the first month, we spend time auditing and refreshing all of the properties online listings with all OTAs. We then put together a dedicated event calendar and dynamic pricing strategy.
Our customers receive regular monitoring of rates and updates via their cloud-based channel manager (all done by Rooms Online on their behalf), and we also ensure we touch base at a more in depth level to ensure we are working on the next 12 months to always be working with your and planning ahead.
Glossary of Terms
Average Daily Rate (ADR)
Is calculated by taking the total earned room revenue, divided by the total number of booked rooms for the night.
Revenue per Available Room (RevPAR)
The metric, which is a function of both room rates and occupancy, is one of the most important gauges of health among hotel operators. This is a performance metric in the hotel industry that is calculated by dividing a hotel’s total guest room revenue by the room count and the number of days in the period being measured.
Best Available Rate
Advertised rate for the day (is a dynamic rate and will fluctuate with demand), this replaces the traditional High/Low/Shoulder seasonal fixed rates
Being responsive to market needs to maximise your return
Online Travel Agent (OTA)
Key online marketing channels where operators can promote and sell room inventory, eg. Booking.com, Expedia
A software platform to manage and sell your room inventory via various channels in real time. Assists to be seen in multiple places whilst managing inventory to avoid double bookings and control where and how inventory is being sold
Property Management System (PMS)
Otherwise known as your reservations management system