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What is revenue management and how could it boost my business?

Revenue management can seem like a confusing and complicated enigma to many hoteliers.  

It’s all fine and dandy for larger hotels and chains, who have the budget and resources to invest in full-time, dedicated hotel revenue managers. But many smaller hotels can find they struggle just to keep their front desk staffed – so employing an experienced revenue manager unfortunately falls far beyond their means.

The task of revenue management therefore often falls to whoever on the staff either has the most time or seems most suited to it.

So for the benefit of those who might just be starting out on the intellectual obstacle course that is hotel revenue management, let’s go right back to basics…

What is revenue management?

In its most basic sense, revenue management is predicting the optimum rate at which you can sell a hotel room to maximise your hotel’s profit.

How you predict that rate can seem like a black art to the uninitiated. But really it can be as complex or as simple as you want to make it.

Simply put, higher demand = a higher room rate.

The demand for any one particular room will vary according to a range of factors, such as the number of other rooms available, the time of year, the day of the week, the nearby competition and so on. And as the demand varies, so will the rate your customers are willing to pay for that room.

How could revenue management boost my business?

If you have a hotel with 50 rooms and they’re all available for a particular night, it would be madness to sit around, holding out for your top rate for all 50 rooms.

Of course, you may sell a few, but balance that with the basic costs of operating your hotel – the staff’s wages, your energy costs, any marketing expenses – and you clearly won’t be coming away with a sustainable profit margin.

Then again, you could sell all 50 rooms at a knock-down bargain rate and end up with full occupancy. Terrific! But wait – how much will it cost you to pay the staff who have to clean all those 50 cut-price rooms? To cook 100 bargain breakfasts? It may well end up that you’re making very little profit after all.

Hotel revenue management is all about getting that balance right and maximising your profitability. It means that rather than passively posting your room rates and waiting for rooms to sell themselves, you can be actively engaged in the selling process, monitoring it and modifying it as sales develop.

If you would like to learn more about hotel revenue management and how it could boost your business, Octopus Revenue can help. We offer a range of revenue management training courses for every level of experience – from veteran to beginner. Take a look at our training calendar for information on the courses we provide.

If you would prefer to outsource your revenue management, we can also help. Get in touch to find out more.

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