What is Revenue Management?
Hotel revenue management is a business practice that seeks to maximize revenue and profit by carefully managing the price and availability of hotel rooms. This is often done by analyzing historical data, such as historical occupancy rates and revenue, as well as demand projections for the coming days, weeks, months, and years.
Based on this information, revenue managers will set specific prices and release certain rooms into the market at strategically chosen times to best meet revenue goals and ensure optimal revenue yield. While revenue management may seem like a complicated process, it is an essential part of modern hotel operations that allows hotels to get the most out of every room they offer.
With millions of data points, making optimal decisions can become quite complicated. Read on to learn more about this tool and how best to choose a solution that is right for your hotel and market.
Essential Features of Revenue Management Software
With artificial intelligence and machine learning, hotel revenue management systems help hoteliers optimize their pricing and inventory to increase revenue. Using software like this comes with many benefits, especially if you’re competing against other sophisticated hoteliers.
To gain the edge you need, your revenue management software must have key features such as demand forecasting, dynamic pricing, automation, and what-if analysis. Simply relying on software to manage your occupancy rates and pricing isn’t enough to hone in on the revenue management strategies you need to stay competitive.
Demand forecasting allows you to anticipate future customer demand based on historical trends. Using this feature, you’ll gain valuable insight into your occupancy, booking behavior, and pricing strategies. You’ll be able to adjust your operations and marketing tactics accordingly to optimize your revenue effectively. Accurate forecasting can increase your profits with maximized occupancy rates.
With dynamic pricing, hotels can adjust their prices based on customer demand, seasonality, availability of rooms, and other factors. This enables you to tailor your rates to different customer segments while still achieving desired occupancy levels. Dynamic pricing also helps your hotel stay competitive in an increasingly crowded marketplace so that you can set your room rates to the right price every time.
The best hotel business tools simplify your business intelligence and analytics to make it easy for you to make data-driven decisions about everything around your hotel. From the guest experience to upselling offers and more, your revenue management software must make it easy to turn your data insights into actionable tasks.
What-if analysis is a method used for exploring different scenarios and predicting their outcomes. It can be used to understand the impact of certain scenarios, like taking group business in the middle of a busy week. This will help determine the effect of these decisions on key performance metrics, such as profits and cash flow. What-if analysis allows your hotel to make informed decisions that can positively impact your bottom line. It also helps you identify potential risks or opportunities before they occur.
How to Select a Revenue Management Software
Revenue management software will help you track and measure your hotel’s demand for various items and services. This will help you determine what your customers are interested in and what to promote.
This will help you align your offerings with customer needs and create a more profitable hotel. However, revenue management software doesn’t just let you track demand. It also allows you to segment your customers based on their needs and other metrics, such as room type, to help you set optimal prices.
Review the Types of Software
Most major brands have their own dynamic RMS. As a brand, independent hotel, or boutique hotel, you may be going through the process of selecting a new RMS.
Many different types of revenue management software are available on the market today. It’s best to spend some time reviewing what’s out there and considering what best meets your specific needs.
Know Your Revenue Goals
The right software can help you achieve these goals by helping you segment your customers and make adjustments on the fly. In addition, revenue management software should allow you to track and report on key metrics and KPIs, such as RevPAR, ADR, and more.
Customers’ willingness to pay is directly tied to your hotel’s value proposition. This is determined by market demand and supply. However, the perception of value varies over time. You can adjust your pricing and services to meet demand by understanding what your customers want.
Revenue management software also helps you manage inventory and set prices. Automating these processes can increase business efficiency. These systems use complex algorithms and data to analyze real-time market demand to optimize pricing and inventory.
Set a Budget
Revenue management is a numbers game, and a good revenue management solution will provide you with a dashboard for analyzing data. This data will allow you to make more informed decisions about pricing and inventory. The more information you have on your revenue, the more effectively you can change your hotel. The key is to choose a hotel revenue management software that makes this data easy to access.
When selecting hotel revenue management software, consider your budget and the features of various software packages. Choose those that will help you achieve the best results for your budget.
Having the right revenue management software is key to optimizing your hotel’s business for growth. This software helps create a value-packed offer for your guests and eliminates the “one size fits all” approach. It also allows you to operate your hotel twenty-four hours a day.
The right hotel revenue management software will help you optimize your revenue per booking. It can also optimize inventory across all online distribution channels and ensure that each channel sells the same rooms.
The software will automatically update information about incoming reservations and room availability in all channels and booking engines. It also offers intelligent reporting features, pricing recommendations, and more, synchronizing data from different channels. These features make it easy to generate reports and review booking statistics. They also give you actionable answers to business questions.
Implement Your New Software
Once you’ve settled on the revenue management software you will use, it’s time to implement it so you can reap the benefits.
That starts with integrating your revenue management system with your property management system (PMS) and all your other software systems, so the information can be freely shared across all the platforms in real-time to allow for better decision-making.
It’s crucial to fully leverage the software because if you pick and choose the features you’ll use, you miss many of the benefits (and the competitive advantage) that comes with them.
To fully leverage your new software, pay attention to the change management process required within your hotel. Don’t expect to make the complete transition overnight. Work in stages, setting goals as you go along.
Work with Prosper Hotels to Make the Most of Your Revenue Management Software
The right revenue management software is an important part of your hotel technology stack. At Prosper Hotels, we have extensive experience in developing and deploying RMS for major hotel brands, leading change management involved with a new RMS.
Competition is fierce in the hospitality industry, so choosing the right team of experts that can help you improve your pricing strategy is key.
Break free from relying on spreadsheets and outdated market data to make pricing decisions and upgrade to better revenue management tools, and lean on an expert team to help you make the most of it.