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Simplified Revenue Management Methodology

Simplified Revenue Management Methodology

In this article, I will try to use several visuals extracted from my Revenue Management Training Programme workshop to be able to give you a brief tour on Revenue Management, key stages, processes we use and models to apply for a successful implementation of revenue strategies.

I will use this article as a base layer of Revenue Management and due to the depth of the subject, I will share several articles on individual areas to shed a light and explore these areas further.

Revenue Management is a complicated process as there is a lot of information to digest, analyse and manage while focusing on tactical short, medium and long-term goals. It requires looking at previous year/period statistical reports, knowing what is going on in the area, keep an eye of competition, reviewing daily occupancy, pick-up and watching the evolution of key indicators to make sound decisions on inventory, rates and restrictions.

You can make all those things if you have a good structure of segmentation, the right control of bookings and accurate past and future projection reports. Ideal revenue management has four levers; inventory, demand, rate and distribution.

Four Levers of Ideal Revenue Management

The true potential of revenue management relies on mostly forecasting, planning and strategy which collaborates its efforts with an efficient sales and marketing plan. Therefore, you have to use 5 key stages of Revenue Management; Data recollection, Interpretation and demand forecasting, Strategy development, Strategic Business Mix implementation and continuous process of Analysing the Results.

Effective Revenue Management Processes
Five Stages of Revenue Management

Our main goal as Revenue Management professionals is to sell as much as possible all your active inventory rooms in your hotel at the highest price.

Revenue Management is Selling the right room to the right customer at the right time and the right price

Where do we start? Before you do anything in revenue management you need to;

  • Know our Product

  • Know our Customers

  • Know our Competition

Therefore, you need to leverage your room inventory by clearly identifying customer needs and then translate this valuable information into actions that truly differentiate your hotel from its competitors and ultimately optimize revenue. This is what we call, Product Definition Process.

Revenue Management - Product Definition Process

Then you need to analysing and reassessing who your primary and secondary competitors to understand who you up against and how you can differentiate yourself from the rest from a guests’ perspective. Once you properly define your competitive set, you need to be able to optimally set prices, create a hotel positioning plan and start measuring your performance against your competition.

Revenue Management - Competitive Benchmarking Process

We then need to move to Strategic Pricing Model which requires a full understanding of strategic and tactical pricing, fair pricing, the relationship between rate parity and rate integrity. We need to be able to analyse index results to determine price potential, using discount and fencing tactics to drive RevPAR by optimise pricing in each segment and ultimately achieve desired revenue and bottom line results.

Revenue Management - Strategic Pricing Model

Once we establish a foundation of pricing strategies, we need to see the big picture and develop strategies to both analyse and create demand forecast. This is where it gets interesting as we need to be able to manipulate our business mix to get most out of our current market regardless of trends and economic conditions.

Revenue Management - Business Mix Manipulation Process

You might excel all previous sections but without an effective multi-channel management you will not be able to get desired results. Distribution Management is all about connecting the dots. Therefore, you need to work together with your Sales and Marketing teams to build a Distribution Management Strategy and ecosystem to sell the right room to the right customer at the right time and the right price.

Revenue Management - Distribution Management Process

Revenue Management requires a good organisational skill, well thought and implemented the strategy, detailed analysis for trends, pace, competition and demand. Therefore, it requires to see both attention to detail for every aspect while keeping an eye on the big picture in a harmony. So far, I have shared pieces of Effective Revenue Management Processes and I would like to take one step back to see the processes as a picture.

Strategic Revenue Management in Four Steps

To simplify, you can look at these five processes in four simple categories;

  1. Inventory & Positioning; It is like, setting the scene and stage which covers all the groundworks required to succeed

  2. Managing Demand; Understanding how to read trends, setting rates and position ourselves accordingly.

  3. Fine-tuning; Monitoring Pace and manipulating mix in any condition to thrive.

  4. Reaching the Right Market; Finding the right balance in between distribution channels to ensure that we will have enough demand from each one of them to be able to filter and decide which is the most appropriate for the hotel.

Hospitality Code provides tailored workshops to train and implement this methodology by translating your company goals into reality. You can reach us either Contact tab on our website or via email directly on to arrange a private chat.

I will pick some important sections of the above methodology and share with you as separate articles. Please follow me on for my articles on various areas of Hospitality business, trends and interpretation methods.

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