What is Revenue Management & how to optimize hotel revenues

Revenue Management

12 Jan What is Revenue Management & how to optimize hotel revenues

The term Revenue Management is being used frequently within the hotel sector of late, with a myriad of expert consultants now working in this field.

But what is revenue management for?

Revenue Management, also known as Yield Management, “is a variable pricing strategy, based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource (such as airline seats or hotel room reservations or advertising inventory)”. (Wikipedia)

Broadening the definition in Wikipedia, this discipline instructs on how to modify prices based on demand trends, in order to increase earnings and sales rates in every period of the year. In practice, the idea is to apply the highest prices when demand is high, and discounted prices when demand is low.

How can Revenue Management be useful in managing my hotel?

There are many advantages this discipline can offer, such as increasing occupancy rates and average revenue earnings per room, allowing for significant profit margins.

]However, Revenue Management is a complex field, full of variables and data to analyze; reading a manual or participating in a seminar can provide a basic overview, but nothing more. To make full use of this system, a method is required for processing information (revenues, booking history, current bookings, no shows, etc.), together with a capacity for vision and analysis, in order to choose the right policy at the right time. Years of experience and specialized studies are required in order to become an expert.
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