By James Dickson, Regional Account Director, IDeaS – A SAS Company
In today’s competitive hotel environment, the importance of revenue management and its ability to impact a hotel’s financial performance is continually expanding. While revenue management is not a new industry practice, it is not always understood or appreciated by hotel owners. So why should they care about revenue management?
Revenue management attracts the right guest for the right price
Hotel owners should be aware that not all business is good business. Hotels that do not utilise revenue management technologies and strategies can easily fall into the trap of selling out to lower-rated business – losing out on higher-rated business and customers. This is the equivalent of throwing money away because a full hotel does not always equal a profitable one. Through the use of revenue management systems and strategies, hotels are able to better identify the customers that provide the greatest long-term value to their business.
To identify these particular guests, properties need to take a holistic view of guest activities – not just the room spend. Data from transaction systems should be integrated to provide a true picture of guests’ preferred activities and their overall value – considering all ancillary spend from online reservations to check-out, food service to spa services, guest rooms to event management and more. In addition to making more profitable decisions, this data allows hoteliers to make more informed decisions about promotions, service offerings, inventory levels and food and beverage options.
Revenue management improves the value of a hotel
The additional revenue that comes from the proper utilization of revenue management systems and strategies directly impacts a hotel’s bottom line, making it a valuable tool for increasing a hotel’s valuation.
Increased revenue leads to higher cash flow, which has a number of benefits from giving the hotel greater day-to-day liquidity, to having money in the bank, to generating interest. Additionally, the increased revenue generated by an advanced revenue management system makes further reinvestment in the hotel possible which, powers a positive cycle of higher revenues. To improve cash flow and grow the property value, it is in the hotelier’s best interest to ensure they are leading the way with revenue management.
Revenue management is a cost saver and revenue booster, not a cost centre
While many hotel owners embrace revenue management and utilize technological benefits to maximize revenue potential; there are still some property owners who consider revenue management as an additional cost and something that is “nice to have.”
When applied to its fullest potential, revenue management and technology can positively impact efficiency and improve operational performance across an entire property. Advanced forecasting tools provide powerful insights into business demand, which assists with
project planning and staffing. For example, if a hotel can anticipate accurate levels of guest occupancy, it can ensure the optimal amount of staff and avoid under or overstaffing.
During periods of higher forecasted demand, it is important hotels are staffed appropriately to handle check-ins, check-outs and housekeeping to make the guest experience smooth and pleasant. Guest satisfaction is a critical driver of repeat business, reputation management and brand perception – all important impacts in an asset valuation.
This same principle can be translated throughout the hotel’s entire operation for better overall staffing and inventory levels. The optimized wage costs translates into financial savings and directly benefits the hotel’s bottom line.
Setting yourself up for success with revenue management
The hospitality industry in Asia is always evolving, and with an upcoming softening in the regional economy predicted for the year ahead, some hoteliers are in for a challenge. The hotels whose owners understand and embrace revenue management will not only survive – but *thrive *in the future.