The landscape of revenue management in the hospitality industry is undergoing a seismic shift. In an age defined by technology and changing customer preferences, the tried-and-true practices of revenue management have evolved, creating both challenges and opportunities for businesses.
With the emergence of innovative tech, shifts in customer expectations, and ever-changing market conditions, revenue management professionals are at the forefront of a dynamic industry.
In this article, we’ll explore some of the trends and developments that are shaping the future of revenue management in the hospitality industry, and how revenue managers can leverage them to optimise their revenue performance.
Definition of Revenue Management in Hospitality
Revenue management in the hospitality industry is the art of applying data-driven strategies to maximise revenue and profitability.
It encompasses everything from predicting demand, determining the best prices, managing inventory, and distributing products and services through various channels. It has played a pivotal role in the success and competitiveness of many hotels and resorts for decades.
At Axsia HTL, we have extensive experience in designing and optimising such strategies. One of our best examples of revenue management and asset management is our recent collaborative approach for a 5-star resort, which showcases how using data and trends can elevate success even during and after the turbulence of COVID-19.
Speaking of the pandemic, it’s clear that the hospitality industry has changed drastically over the last several years. Even before this abrupt change, however, we were seeing things beginning to shift in the hotel industry.
The Changing Landscape
It’s no secret that good revenue management strategies have been key factors in the success and competitiveness of many hotels, resorts, and other hospitality businesses in the past decades.
However, the hospitality industry is undergoing rapid and profound changes due to the emergence and evolution of new technologies, customer preferences, market conditions, and business models. Let’s take a closer look at the changing landscape of hotel revenue management strategies.
Advancements in technology have revolutionised revenue management practices, enabling revenue managers to collect, process, analyse, and act on large amounts of data from various sources. Think valuable and data-rich streams like customer behaviour, market trends, competitor actions, social media, online reviews, weather, events, you name it.
Technology also allows for the automation of many tasks that were previously manual and time-consuming, such as pricing, inventory management, distribution and reporting. Tech programs that streamline these administrative processes have been game-changers in the industry.
Despite these positive outcomes, we’re also seeing technology increase the complexity and dynamism of the market environment. This presents an interesting new landscape that poses some challenges, particularly in customer preferences.
Shift in Customer Preferences
Thanks to technological shifts and subsequent market changes, customers have more choices, information, and power than ever before.
They can easily compare prices, products, and services across different platforms and channels, such as online travel agencies (OTAs), metasearch engines, direct booking websites, and mobile apps. Customers can also switch between different providers and channels at any time, depending on their preferences.
It’s therefore crucial that revenue managers adopt a customer-centric approach to revenue management strategies in the hospitality industry. Managers can effectively use technology to:
- Understand the needs, preferences, expectations, and behaviours of their customers across different segments, markets, channels, and touchpoints.
- Segment their customers based on various criteria, such as demographics, psychographics, booking patterns, and loyalty status.
- Monitor and measure customer satisfaction and loyalty across different channels and touchpoints.
- Communicate and engage with their customers before, during, and after their stay.
Evolving Market Conditions
Alongside these fast-moving tech advancements, the hospitality industry is constantly evolving, with unforeseen disruptions and changing customer preferences driving shifts in market conditions.
To remain competitive, businesses must adapt and innovate. Revenue managers are essential in helping companies navigate these dynamic changes, such as:
- Global events and uncertainties like the COVID-19 pandemic: Revenue managers play a crucial role in adjusting pricing models, assessing trends, and handling uncertainties, ensuring businesses can thrive during such disruptions.
- Intensifying competition: With increased competition, businesses need to innovate continually. Revenue managers offer valuable insights into pricing, distribution, and market trends, enabling businesses to identify growth opportunities and enhance revenue performance.
With so much rapid change in the hospitality industry at the moment, it can be easy to feel overwhelmed. Our core piece of advice when devising new revenue management strategies is to embrace innovation.
Businesses who dare to push the envelope with bold ideas and new technologies will not only stay afloat in times of change, but will rise above the competition to new and exciting heights.
The Need for Creativity and Flexibility
In the ever-changing world of revenue management, adaptability and innovation are non-negotiable. It’s no longer enough to rely solely on traditional methodologies.
Creative solutions and flexible strategies are key to thriving in this dynamic landscape. Revenue managers must go beyond the numbers and embrace a holistic perspective. They need to craft inventive pricing structures, leverage advanced data analytics, and embrace innovative technology to stay ahead.
These imaginative approaches help set new industry standards and create a clear path towards enhanced profitability.
The Role of Revenue Managers
In the current hospitality landscape, revenue managers have evolved into customer-centric strategists. Their role extends far beyond mere number-crunching.
By understanding and segmenting customers based on a myriad of criteria, revenue managers can tailor experiences to meet specific needs and preferences. They employ cutting-edge technology to track satisfaction and foster loyalty throughout the customer journey.
These managers act as conduits between data and guest expectations, ensuring that each visitor’s experience aligns seamlessly with the brand’s vision and market positioning. Their customer-focused approach leads to not only increased revenue but also enriched brand loyalty, setting the stage for continued success in a competitive market.
Trends Shaping the Future
When looking ahead, we’re seeing several clear trends emerging in effective hotel revenue management strategies.
While it’s always important to tailor your own strategies to the needs and circumstances of your business, we recommend looking out for these areas and implementing them as core ways to expand and improve your planning.
Personalisation and Customisation
Personalisation and customisation can increase the revenue and profitability of a hospitality business in a few key ways. It can:
- Enhance customer satisfaction and loyalty, as customers feel more valued and appreciated by the hospitality provider.
- Increase customer willingness to pay, as customers perceive more value and differentiation from the hospitality product or service.
- Create more cross-selling and up-selling opportunities, as customers are more likely to purchase additional products or services that match their needs or preferences.
So, what are some examples of revenue management personalisation strategies?
- Revenue managers who effectively use technology to collect and analyse data about their customers across different segments, markets, channels, and touchpoints.
- Customer profiles and personas created from this data that capture the needs, preferences, expectations, and behaviours of the target demographics.
- Customised products or services offered to customers across different channels and platforms.
- Revenue managers who monitor the impact of personalisation and customisation on customer satisfaction, loyalty, revenue, and profitability.
Benefits of Integrated Systems
Integrating different revenue management systems is vital to overcoming inefficiencies and errors in the process, such as incomplete data, analyses based on faulty models, inaccurate forecasting due to insufficient data, or inconsistent pricing across different platforms.
To overcome these issues, integrated systems are starting to be operated by different departments or functions within many hospitality businesses, such as sales, marketing, operations, and finance.
We’re also seeing them being used by different external partners or providers, such as OTAs, metasearch engines, and revenue management software vendors.
An integrated system enables revenue managers to:
- Access and consolidate data from various sources in a single platform.
- Apply consistent and comprehensive analysis and forecasting across multiple services.
- Implement optimal and dynamic pricing strategies.
- Manage inventory effectively and efficiently.
- Distribute products or services optimally and strategically.
- Generate timely and clear reports on revenue performance and outcomes.
Expanding Beyond Room Rates
The final trend that’s making waves is expanding beyond room rates. While room rates remain the main source of revenue for most hotels, it’s important to remember that they’re not the only source – far from it.
Customers are more and more seeking a holistic experience from their accommodations that extends beyond their rooms. Expanding revenue management to include other products and services, such as F&B, spa, events, and parking, increases total revenue per available room (RevPAR). This KPI plays a major role in enhancing profitability and customer satisfaction.
Adapt to the Future of Revenue Management With Axsia HTL
As revenue management transforms, revenue managers must embrace innovation, flexibility, and customer-centric practices to optimise revenue performance and drive success in the evolving hospitality industry.
By leveraging trends and developments, revenue managers can also optimise their revenue performance and create more value for their customers and stakeholders.
If you’d like assistance with creating your revenue management strategies, the team at Axsia HTL is here for you. Our extensive experience in hotel asset management and advisory services, and with a keen eye on the market and latest trends, we know what makes things tick when it comes to hotel management.
Get in touch with us to talk about your revenue management strategy today.