What is a Revenue Management System? & Why You Need One

Revenue managers in the hospitality industry constantly battle many factors that threaten profitability. Success in the hotel industry often depends on managing revenue through the ups and downs of the supply-demand seesaw, navigating seasonal fluctuations, and responding effectively to unpredictable market conditions. 

Managing the interplay between bookings and pricing is one key to a hotel’s growth and profitability. To design effective pricing strategies, revenue managers must be in tune with competitor pricing, monitor the market landscape for potential changes in demand, and make rapid changes to offerings across distribution channels.

A revenue management system is invaluable for revenue managers to manage pricing and monitor demand in a competitive landscape.

In this article, we will review how a revenue management system can help your revenue management team sell rooms to the right customers at the right time and right price via the chosen distribution channel. 

What is a Revenue Management System? 

A revenue management system (RMS) is a software solution that automates daily revenue management tasks to save time, improve accuracy, and increase efficacy. 

A good RMS aggregates historical data from your hotel and your competitor set. It uses advanced algorithms to analyze the competitive landscape, market dynamics, and future demand to calculate optimal prices that will result in maximum profitability.

Most modern revenue management solutions have automated features that help your revenue management team quickly implement decisions to change demand scenarios by adjusting rates across distribution channels and without human error. 

An RMS uses future demand data to project expected revenue and profit with your current pricing strategy. Using this information, your revenue manager can test various pricing strategies and make data-driven pricing decisions. Modern RMS solutions have a centralized dashboard to track and monitor important metrics, saving your team’s time and effort in aligning stakeholders to make decisions.

Why Revenue Management Systems are Essential

Modern hotels have hundreds of rooms — and there may be several types of hotel rooms with different pricing. Each property may have a host of competitors. Devising dynamic pricing strategies that take into account a host of factors is time-consuming and labor-intensive. Manual analysis and complex calculations are prone to human error and take up expensive resources. 

An automated revenue management software system is essential to make strategic decisions that are based on real-time data and improve overall profitability.

Let’s look at some reasons why you need a hotel revenue management system:

Easily adjust pricing to maximize profitability

An RMS makes adjusting price points across various distribution channels easy. Your channel manager doesn’t need to log into a different system for each distribution channel — you can manage pricing across channels through a single centralized system without wasting precious time and effort.

An RMS also lets them quickly calculate the optimal room price based on current occupancy levels in your hotel. Once they set a minimum to maximum rate range, the system can automatically increase your rates and distribute them across various channels as the occupancy during the relevant time frame increases. 

Consequently, key performance indicators, such as revenue per available room (RevPAR), can be improved, which increases the hotel’s earnings and profit margins.

Market data tracking

An RMS tracks pricing across your hotel’s competitive set. It monitors pricing across similar hotels in your location and can deliver an analysis of expected demand and advance bookings in other properties like yours.  

Based on data from your hotel and real-time analysis of market demand and supply, an RMS makes swift, frequent pricing recommendations to keep your hotel’s room rates at optimal levels all the time. 

Calculations without human error

Large hotels must track multiple KPIs and monitor several competitors to get their pricing strategies right. So, they need to use automated systems to manage revenue to maximize RevPAR and total revenue. However, a heavy manual load on revenue management teams can lead to errors in calculations, resulting in poor decisions that could lead to a loss in potential revenue.

More decisions in a day than humanly possible

An RMS allows complex calculations to be completed quickly and encourages real-time tracking of market data that can often be impossible to achieve manually.

An RMS works 24/7, 365 days a year, making accurate, data-based decisions quickly and continuously, much more than is humanly possible.

Prosper’s revenue management consultants use your existing RMS to track competitor data and study how pricing changes impact your hotel’s bottom line. Our revenue reporting services help you stay agile and boost revenue growth to keep you ahead of the competition, no matter the market conditions.

What to Look For With Your Revenue Management System

If you’re looking to deploy a Revenue Management System (RMS) for your hotel, you have many options to choose from, depending on your hotel business’s unique requirements. 

Here are a few key points to keep at the top of your priority list when searching:

Seamless integrations

When you look for the ideal RMS, ask whether it integrates seamlessly with your current or existing technology stack. Pick an RMS solution with robust integration capabilities, so your current data can be put to good use, and you can make the most out of the investments you have made in other systems, such as a property management system (PMS) or business intelligence (BI) system. 

Flexible data models

Look for an RMS with flexible data models that can take into account data from various sources, analyze extensive market data, and use your own hotel’s data. 

Many RMS systems today use advanced AI-based data models and machine learning technology that progressively refine analysis and predictions based on past data and continuously improve the quality of their insights and recommendations. These data models ‘learn’ with consistent daily usage, constantly gaining experience that enables them to improve the accuracy of their forecasts and pricing decisions.

Regular improvements to keep up with industry trends

The hotel industry is constantly evolving. Look for an RMS system that stays updated on industry trends and leverages the latest technology to provide you with cutting-edge features and functionality. 

Key Revenue Management System Capabilities

Let’s look at some of the most important features of an RMS:

Room Rate Suggestions

Probably the most critical feature of an RMS is its ability to accurately calculate the best room rates at a faster rate using advanced algorithms, up-to-date market data, previous performance data, and more. 

In addition, it must allow you to easily adjust master rates and automatically make related changes to dependent rates across different distribution channels. This helps you leverage the most out of automation and provides you with the real benefit of an automated system, cutting out manual efforts, giving you a competitive advantage of time and delivering data-driven decisions accurately with minimal chances of error.

Current Occupancy Reporting

An RMS provides critical performance data, including occupancy rates, RevPAR, and average daily rate (ADR). It allows you to view performance data from the previous month, the prior year, and various other time frames.

Revenue Forecasting

An RMS can provide you with estimates for the revenue and profit you could possibly generate with your current pricing strategy. You’ll also be able to review estimates for alternative pricing strategies to determine the best course of action moving forward.

AI-enabled RMS solutions can make decisions on the ideal price based on information such as competitor rates, demand forecasts, and internal factors like the length of stay. 

It helps revenue management teams make accurate forecasts around expected demand and occupancy rates and delivers unique insights into how various factors affect your revenue and profits.

Competitor Monitoring

An RMS with a real-time price optimization feature will continuously track real-time market rates for all room types. Competitor monitoring is essential to ensure your hotel does not miss out on potential revenue. 

Access to future demand data for your competitor set keeps you better equipped with intelligence that allows you to compete effectively with optimal rates and offers.

Seamlessly Manage Revenue with Prosper Hotels

No matter which revenue management system you choose, with Prosper Hotels, you can leverage the most out of your RMS. 

We help you to design effective revenue management strategies, optimize room pricing, forecast more accurately, and increase your hotel revenue and profits.

Once you’ve chosen your preferred RMS, our team can help you implement the system and configure the dashboards and reports for the specific KPIs that will impact the top and bottom lines.

Our revenue management experts use data and reports from your RMS to continuously improve your total revenue and optimize profitability while leaving you free to focus on what you do best — deliver a stunning guest experience.

We work with hoteliers and revenue managers to create a customized plan, leveraging the most out of your revenue management system to maximize revenue and profitability.

Schedule a consultation call with our revenue management experts today. 

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