Recommendations on How to Improve Hotels Revenue Management

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Recommendations on How to Improve Hotels Revenue Management
Abstract
The hospitality industry's fundamental concept of revenue management helps hotel owners in demand anticipation, availability optimization, and pricing in pursuit of achieving the best possible financial results. Revenue management entails data performance and analytics, which gives the hotel owners in demand and other consumers’ behaviors accurate prediction. In turn, this allows the hotel owners to make sensible decisions about distribution and pricing to maximize revenue, hence profit. For effective revenue management, hotels must have an approach of demand and consumer spending habits forecasts to make informed adjustments. For instance, hotels use weather forecasts, existing bookings, past data, and other industry data, imbuing the strategy for revenue management.
Introduction
According to Ivanov, &Vladimir Sashov Zhechev (180), revenue management in the hospitality sector enables hotels to cope with perishable inventories and high fixed costs. For instance, hotel rooms have fixed costs despite the number of people who will occupy the room in a day. Therefore, revenue management assists hotel managers in predicting the prices of the rooms. Failure of the hotels and restaurants to manage their revenue leads to losses. In this case, there is a need to have recommendations that will assist hotels and restaurants in maximizing revenues and profits at the end of the financial year. This essay examines the importance of revenue management in hotels, common mistakes made by hotel managers in revenue management, challenges of hotel revenue management. It recommends how to improve hotel revenue management.
Importance of revenue management in hotels
Hotel revenue management to maximize profits through cost cut downs
Xu, Xun, et al. (2019, p.124) argue that revenue management help hotels to lower their costs. Currently, booking trends rely on factors such as season, region, and the average age of travelers, amongst many other factors. To this end, the optimal rates of selling the rooms are very dynamic, and each day depicts a different trend and rate. An ideal revenue management strategy helps in determining the best price to vend rooms and enhances the hotel capability to plan through workforce optimization during peak seasons and avoiding overstaffing during off peaks.Proper management of hotel resources through need prioritization enables hotels to maximize the use of resources and cut down costs by avoiding unnecessary expenses. With revenue management, hotels can implement data-driven strategies that will influence the decision of the owners in managing the inventories (Kimes 9). This also ensures that everyone gets informed of all the decisions of the company. As a result, the revenue of the restaurants goes upwards.
Revenue management ensures that hotels generate profits from the perishable inventories in the rooms (Xu, Xun, et al., p.124).Further, revenue management allows hotels to maximize profits that a hotel can generate daily. The decision-makers are always informed of all operations that are taking place in a hotel instead of relying on the information provided by the employees in the organization, hence maximizing profit. According to Burgess, Cathy, and Keith Bryant (2001, 147), just like all other businesses, hotels also have fixed costs. The managers ensure that, these fixed costs are paid the regardless number of occupied rooms on a specific day. This fixed cost must be paid irrespective of the amount of money the guest pay. Thus, through revenue management, hotel owners always ensure that the fixed costs have been paid, and prices and services maximized significantly.
Hotel revenue management to attract the ideal guests
Donato, Robert (2019.np) argues that not all businesses received by a hotel can be lucrative. While occupancy maximization is essential, return clients are more lucrative relative to new ones because it is more costly to always look for new guests. A full hotel is not still profitable as bad revenue management, for instance, paying out substantial commissions and selling rooms’ at meager rates leaves hotels in significant losses even when maximally occupied.
Automated revenue managers enable hotels to identify the ideal customers that provide exceptional long-term value that allows continuity of the business (Donato, np). To determine the right guests, hotels evaluate both the room data and all guest spending activities, for instance, bar, gift shop, and restaurant expenses help hotels to obtain guests' overall value and preferred activities clear picture. Additionally, hotels use such data to make better decisions regarding marketing campaigns and promotions.
Hotel revenue management to improve branding
Proper revenue management in a hotel improves branding. According to Kansakar, Prasanna, Arslan Munir, and Neda Shabani (2019.p.61), effective utilization of hotel revenue strategic management plays a vital role in promoting a hotel brand. Better pricing of hotel rooms improves the property occupancy, ensuring that the hotel sells all rooms at a maximized price and generates maximum revenue per room at a given time. While collection and reporting of data building were extremely time-consuming to hoteliers in the struggle to access the required data, today, revenue management is easily implemented on the cloud platform with advanced and automated software.
Revenue management needs technological support like optimization of algorithms. This ensures that all the results have been achieved in the company. Thus, hotel managers need to understand all the necessities that are required to balance the profits and losses of the hotel. As a result, they will be able to determine what the guests are supposed to pay for every room (Burgess, Cathy, and Keith Bryant 148). These activities are critical because they will enhance the profitability of the businesses. When they have been able to optimize the income of the entire industry, owners are capable of making changes to the current revenue of the hotel. They will be able to understand the needs of the customers. The information of the guests will be used to obtain insights on what they like.
Common mistakes made by hotel managers in Revenue Management
Ignoring time: When time is ignored, hotels fail to produce the desired revenue results. Hotel managers should focus on the speed of the market. In some hotels, a lot of time is spent on promotions, meetings, and actions, thus missing out on crucial schedules, for instance, target segment typical booking window. This triggers a complete flop of a promotional campaign due to wrong timing as a result of missed schedules. According to Vieveen, Iris(2019,p.195), missing out on a crucial booking window is catastrophic to the hotel industry and can be avoided by taking advantage of revenue management software and reporting features .Additionally, managers fail to focus on the market speed, thus costing hotels a lot of money due to the slow implementation.
Focusing on the wrong metrics: Hotel revenue managers need to understand the demand of the business. They should also track the prices of their competitors. Hotel managers focus too much on average room leading to business downfall. Successful revenue management in hotels lies within an analysis of the average daily room rate while enhancing the occupancy (Vieveen, Iris, 196). Revenue managers fail to track the impact of net revenue earned per room daily; thus, poor business performance characterized by reduced profits.
Being afraid to make changes: Hotel revenue managers fear to change rates due to high competition from business rivals. This creates a significant loophole for hotels to lose revenues. The statistic rates prevent the hotel from exploiting its full revenue potential. Cox, Carmen (2018, p.356) argues that regular change of prices reflects demand and supply as an approach to maintaining a steady booking pace. Moreover, extremely high demand triggers an additional level of pricing decision complexity. Revenue managers in hotels engage in haphazard pricing leading to downfall. The managers fail to analyze the trend before deciding on the prices, therefore escalating the chances of making bad decisions and also miss out on other opportunities to increase revenue.
Poor utilization of technology: Hotel revenue managers should leverage technology to ensure that they have achieved higher revenues. For example, Revenue management software can be used to make data-driven decisions (Cetin, Gurel, Tevfik Demirciftci & Anil Bilgihan 137). The information provided by this software will give detailed data on the booking history of the company and the rates of discounts. With these, managers will be able to maximize profits. However, hotel managers fail to examine the price strategy impact; thus, the decisions made are not data-driven; therefore, vital information such as details of the rate discount and the booking history rate. To this end, the hotel revenue managers fail to maximize revenues due to the unattractive and uncompetitive rates offered to the guest, hence losing their guests to other competitors.
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