Using Revenue Management

General tactics to improve the hotel’s revenue stream:

• Be bookable online
  These days travelers enjoy the flexibility, convenience, and value of booking online. By connecting to online travel agents/more online travel agents you’ll easily see an uplift.
• Build a revenue culture
  Who’s on your revenue team? Everyone! Anticipatory service + proactive revenue-minded employee = emotionally connected customers with engaged loyalty and higher revenue returns.
• Sell other hotel products
  Revenue opportunities extend far beyond simply selling your rooms. Think about the amenities you have on-site and what you are charging for them, and go even further by offering hotel guests the chance to purchase items like soap, utensils, towels, etc – especially if your hotel has a unique sense of style.
• Leverage events and attractions
  Local events and attractions are a great opportunity to put together packages for guests or offer additional services such as transport. The benefits are two-fold – guests will enjoy their stay more and your hotel will generate more income.

High Demand Tactics

High Demand Tactics includes-

1. Close or restrict discounts – Analyze discounts and restrict them as necessary to maximize the average rate. You may offer discounts to those who book longer stays, or restrict bookings to shorter stays.
2. Apply a minimum length of stay restrictions carefully – A minimum length of stay restriction can help a property increase room nights. For groups, study the groups’ patterns and decide how many days they are likely to add to their stay.
3. Reduce group room allocations is another great tactic– Communicate with group leaders on a regular basis. Make sure the group actually needs the number of rooms identified in its contract. If not, make adjustments.
4. Reduce or eliminate 6 P.M holds – Reduce or eliminate the number of unpaid rooms that are being held until 6 p.m. When demand is high, you need rooms available to fill.
5. Tighten guarantee and cancellation policies tactics– Tightening guarantee and cancellation policies help to ensure payment for room nights. Charge credit cards for the first night’s stay on the day the reservation is made.
6. Tactics on raise rates to be consistent with the competitors – Charge rates consistent with the competition, but the limit rate increases to those rates published in the central reservations systems and listed in brochures for the period.
7. Consider a rate raise for packages – If you are already offering a package discount, consider raising the rate for that package.
8. Apply full prices to suites and executive rooms – In a high-demand situation charge full price for suites and executive rooms.
9. Reserve close to arrival dates – By allowing the reservations to be taken for a certain date as long as the guest arrives before that date, a property is able to control the volume of check-ins.
10. Evaluate the benefits of sell-throughs – With a sell-through, the required stay can begin before the date the strategy is applied. This is often used when one day has a peak in occupancy and management does not want the peak to adversely affect reservations on either side of the peak day.
11. Apply deposits and guarantees to the last night of stay – For longer lengths of stay, make sure the deposits and guarantees apply to the last night of the stay, minimizing early departures.

Low-Demand Tactics

Low-Demand Tactics includes-

1. Sell value and benefits tactics– Rather than just quoting rates, make sure guests know you have the right product for them at the best value. Sell the various values and benefits of staying at your property versus others that the guests may be considering.
2. Tactics on Offer packages – To increase room nights, one tactic is to combine accommodations with a number of desirable products and services into a single package with one price. Mention any additions, renovations, or new amenities. Non-room revenue can be included, for example – free movies, discounted attraction tickets, and shopping coupons.
3. Keep discount categories open – Discounts are directed toward particular markets or are instituted during a particular time or season. During low-demand time, it is important to accept discounts to encourage room nights.
4. Encourage upgrades is another great tactic– Move guests to a better accommodation or class of service to enhance their experience and encourage them to come back to the property again and again.
5. Offer stay-sensitive price incentives – A stay sensitive price incentive provides a discount for guests who stay longer. For example, a guest staying 3 nights might get an additional Rs.2000/- per night discount, while a guest staying one night might not
6. Remove stay restrictions – Remove any stay restrictions so guests are not limited as to when they can arrive or depart. Guests who can stay only one night will be encouraged to stay as well as those who are staying for a week. This will help to maximize occupancy.
7. Involve your staff – Create an incentive contest to increase occupancy and room nights. Make sure to involve all members of the revenue department as well as central reservations staff.
8. Establish relationships with competitors – Having a cordial relationship with competitors can help with referrals and can help to carry out cross-marketing efforts.
9. Lower rates tactics– There is great value in keeping guests at the property as long as you are at least covering the cost of occupancy. You may want to lower your rates as low as possible. Identify the hurdle rate, which is the lowest rate acceptable at that given date.

Hotel pricing strategies

There’s no pricing strategy that is perfect for any hotel. Each property must consider the pricing strategy, or strategies, that work best for its particular brand. A revenue manager will spend a lot of time analyzing data and other influencing factors to ensure the business is operating with the best possible chance to maximize income.

There are a number of questions that should surround your pricing strategies:

• What do your guests want?
• Which strategy will complement the business mix?
• How will different strategies affect connected channels and distribution partners?
• How does your strategy integrate with your channels?
• Who are the experts that can help determine the right strategy?

Let’s take the first question as an example. Certain guests will prefer or be accustomed to particular pricing methods. For instance, some may like a cost breakdown of their stay by a day, while others are happy with a rate for their entire stay. This is where either Daily Pricing or Length of Stay pricing strategies might come into play.

With all that in mind, the first priority of pricing should be forecasting. This way you can predict demand so you can get travelers to book early. Then you can raise rates later as availability drops and demand increases. (This is an ideal pricing structure known as the “ascending model” whereby pricing increases closer to an arrival day.) We’ll talk more about forecasting and analysis later.

Here’s a list of the most common and effective pricing strategies you can employ at your hotel.

What is dynamic pricing?

Dynamic pricing involves changing room rates daily or even within the day based on real-time market data. Taking supply and demand into account, prices should fluctuate regularly if you want to maximize revenue. This pricing option is well suited in today’s market and is one many hotelier opt to use.

Dynamic pricing examples

Put simply, there will be days where supply and demand will be very different depending on the time of day. In the morning you may have lower rates because your occupancy is low, as is demand. However, by that evening supply may have reduced and demand grew.

Many factors can drive this, such as competitors putting up their no vacancy signs or setting rates slightly too high, or travelers arriving late for events the next day and so on. You can raise your rates to take advantage of the shifting market and earn more revenue than if you’d kept your rates static.

What is an open pricing?

Open pricing defines the flexibility hotels around the globe have to set their prices at different levels depending on the various target markets and distribution channels they deal with.

This luxury of choice allows hotels to forecast more accurately. For example, a high-end hotel may usually attract guests who no budget constraints but in the off-season, bookings will drop and the hotel can drop rates to attract travelers who normally would not be able to afford the stay. While the average daily rate of the hotel will be lower, occupancy will remain steady and revenue will continue to turnover.

Other pricing strategies

There are numerous pricing strategies you can use at your hotel as part of your broader revenue management strategy, many of them in conjunction. Here’s a list of the most common pricing strategies your hotel might find useful:

• Value-added pricing
  You can set your room rates higher than the local competition while also offering more extras in the basic package. This gives the illusion that the hotel offers a premium experience that focuses on value rather than just low rates.
• Discount pricing
  Used in slow seasons to boost occupancy by dropping base rates. Revenue can be made up of other services in the hotel.
• Price per segment
  Offering the same product at different prices to different types of customers. E.g ‘family rate’
• Length of stay
  When demand outweighs supply, it can help to implement a rule where guests are ‘obligated’ to stay a minimum number of days. In such cases, lower rates may not be necessary.
• Positional pricing
  Basing your rates off-brand strength and reputation.
• Penetration pricing
  Positioning yourself as the cheapest in the market. Be mindful of how travelers will perceive your hotel – you need to retain the opportunity to sell at higher rates.
• Skimming
  Positioning your hotel among the most expensive. Price leaders often achieve among the highest profitability, however, the consumers need to clearly understand the reasons that they would pay more for staying at your hotel.