What Is Hotel Revenue Management?

Hotel revenue management is selling as many rooms as possible at the best possible rate, to the right guests, through the right channels, so the property ends up with the most revenue it can keep. Not the fullest hotel, and not the highest price: the best result from both.

There is more to it than that. Here is what it involves, in plain words.

What a Revenue Manager Does

  • Forecasts demand for every date ahead, from what is on the books, last year, events and the market.
  • Sets the prices for every date and room type, and moves them as demand changes.
  • Manages restrictions: minimum stays, closed arrivals, and which rates are open when.
  • Chooses the channels: your own website, the OTAs, groups, corporate and tour operators, and what each one costs.
  • Checks the pace every week against forecast and target, and acts on slow and fast dates the same week.
  • Measures in net revenue: after commissions and VAT, so the property earns more, not just sells more.

Knowing Your Guests

It starts with the guests. Who stays with you, when and why? How far ahead do they book, for how long, in which room types and through which channels? What else do they spend on: breakfast, the restaurant, the spa, parking?

You can split guests by almost anything. The splits that matter are the ones that change a decision: leisure or business, individual or group, short stay or long, booked early or late. Know them, and you can see the patterns, forecast the next season and price for it. You can also look after each guest better.

Prices That Follow Demand

Airlines got there first. In the 1980s, American Airlines was one of the first to price seats by booking patterns instead of fixed fares. Today nobody is surprised that the passenger in the next seat paid twice as much, because they booked later or through a different channel.

Hotels work the same way now. The price of a room night should reflect the demand for it: the season, the day of the week, events in town, what competitors charge and how fast the date is filling. One price for weeks sells the busy nights too cheap and leaves the quiet ones empty. More in How Dynamic Pricing Works in Hospitality.

We run live dynamic pricing: rates for all future dates update several times a day, and a revenue manager steers them with the forecast and your targets.

The Right Offer for Each Guest

Every guest is different, so the offer should be too: the right room type, at the right rate type, at the right time, through the right channel, and at the right price.

In practice that means a clear ladder of room types, the rate types guests look for (flexible and non-refundable, with or without breakfast), stay rules that fit each season, and a calendar open far enough ahead for early bookers.

The Numbers Behind It

Three numbers do most of the work: occupancy (how full you were), ADR (what you earned per room sold) and RevPAR (room revenue per available room, which counts both). We explain all three in Occupancy, ADR and RevPAR.

Then comes net revenue: what is left after OTA commissions and payment costs. Two properties with the same room revenue can keep very different amounts. See Net Revenue vs Gross Revenue.

A Healthy Business, Not Just Revenue

Revenue management works best on a healthy business: rooms mapped correctly in every system, a website and listings that convert, content kept up to date, and a segment mix that brings the most net revenue. That is what we look after, not only the rate.

It Never Works Alone

Revenue management cannot work as a standalone discipline. It goes hand in hand with:

And no two days are the same in hospitality. Markets move, guests change and strategies have to follow. The job is to keep adapting, so the property keeps earning more.

This is our work in Revenue & Pricing Management, for hotels and apartments of any size. Want to know where your property stands? Book a free Performance Assessment Call.