An introduction to revenue management would not be complete without a brief history. First introduced by the airline industry in the early 1980s, yield management, as it was then known, helped American Airlines drive profits up 47.8% in its first year of implementation. JW Marriott took note, and by the mid-1990’s, revenue management added over $150 million in annual revenue (source) for his hotels. Not bad, right?
Yet small hotels largely ignore revenue management. And we can understand why. In theory, revenue management is the practice of using data to optimize rates and inventory in order to maximize revenue. For example, a revenue manager would reference data to confidently turn away one booking because another, higher-revenue booking is expected. Or they would intentionally overbook the hotel to offset the lost revenue from anticipated no shows. And they always monitor their pick-up in order to increase rates and generate more revenue on high demand dates. These are just a few examples of traditional revenue management. Moreover, they are examples of traditional revenue management for big city hotels.
So it makes sense that small hotels would shy away from it. Especially when the tactics don’t always apply. For example, dynamic pricing is nearly impossible to implement without connectivity. As well, small hotels are more likely to rely on relationships. They are therefore less likely to turn away a booking for fear of upsetting a loyal guest or partner. And most would not dream of intentionally overbooking their hotel; nor should they ever employ this particular tactic, in our opinion.
But you can tweak these tactics, and make them work for your hotel. Our style of revenue management consulting breaks down the theory and guides your team to achieve its most basic goal. That is, to maximize hotel revenue.