Maximising hotel profits by adding to the customer base is a powerful way to increase income. But simply adding to the customer base and making the hotel jam-packed isn’t always the best method for a long-term growth and development plan. There is a need to qualitatively and quantitatively assess the customer’s behaviour to predict their spending pattern. This will, in turn, help to set up the saleable product(s) at the right place at the right time for the right buyer. As per the definition of the hospitality industry, hotel revenue management must mean selling the fitting room to the right customer at the right time on the right distribution channel with the best commission efficiency.
The components which comprise revenue management are customer segmentation, demand forecasting, inventory management, yield management and pricing. These components are pretty interconnected and significantly impact the ultimate financial memo of the hotel.
Customer segmentation helps identify a group of customers in your hotel and address them differently. Someone travelling on business will have different needs than someone travelling with their family. Knowing the database of one’s customers can significantly help them prepare the company accordingly. These segmentations can vary greatly, ranging from stay duration, booking channel, and demographic factors.
Moreover, this customer demand is seldom static. It fluctuates highly and depends upon various factors like season, events etc. This is where demand forecasting comes in. Analysing information about past demand and keeping track of future events across all customer segments can enable one to predict when or if the market will increase or decrease. Finally, this will allow one to develop the proper pricing, marketing and distribution mechanisms.
However, all of the above depends upon defining customer behaviour and setting the best price to sell the rooms with maximum profit. This is precisely the goal of yield management. Yield management focuses on the cost and volume of sales. Before proceeding further, one should be aware of a term used quite frequently-‘inventory’. Revenue management refers to the product sold, in our case, rooms. Hence space is considered a perishable product. It doesn’t signify the traditional meaning of perishable. Instead, it indicates that the hotel loses money if a room isn’t sold for a night.
Lastly, pricing is the penultimate factor that can make your business stand apart from others. By analysing the market and understanding the customer and booking trends, one can set optimal rates for their inventory, thereby maximising revenue. Different methods are adopted for this, including dynamic pricing, available pricing, packages and value-added pricing. A robust cancellation policy can also impact the pricing strategy. Active pricing strategies based on supply and demand ratio can allow hotels to keep at par with the market while maximising the occupancy rate.
Hence, a hotel revenue manager has a long list of duties to achieve optimum results by cooperating with all hotel departments and focusing on sales and marketing. The objective of a marketing strategy is to increase the volume of sales. Promotions, discounts and loyalty programs are among the marketing activities that allow the business to sell its inventory by keeping customer flow steady and attracting new guests.
Discuss such topics at the Hospitality Management College at Amrapali Institute, Haldwani. Amrapali Educational Institute is a top-ranked institute in Uttarakhand.