Why is Revenue Management Important?
My favourite comparison on this topic is the supermarket scenario. Your rooms, villas, apartments, sites, or cabins are not like the perishable items for sale at your local supermarket. You cannot put a clearance sticker on it once you pass or get close to the best before date. Wouldn’t it be great if we could get $30 for that $49 site that did not sell yesterday?
Essentially, poor revenue management can have a huge impact on your bottom-line profit! Profit is the reason why we are in business after all? Some say it is an art, others say it is a science. The truth is…it is both! There is a method to it, but there is a lot of gut feel to it too.
When you have poorly managed revenue, there is a good chance you are greatly devaluing your product. This is something that takes a long time to come back from.
When we look at revenue there are so many factors to consider. It is often about combining those different factors that you already see drive your business the most and adding a couple of new options and focusing on that. Often, we see businesses without a revenue manager, trying to do everything a revenue manager would, and before they see results, they give up and shift their entire focus to something else. The hard truth is, there is a reason this is its own job. So, if you do not have the resources to have a revenue manager, do not be too hard on yourself. You just have to find those key revenue management driving factors for your business, and dedicate the time to look at these daily, weekly, monthly, or even quarterly.
Some considerably basic principles can really make an impact to your bottom line. Here are some key points to consider if you have never thought about revenue management in your business:
- Managing your rates based on true availability and demand rather than the old school seasons set and forget style.
- Thinking a little more about length of stay offers. Do not just have them for the sake of it. Do not just reward average, only give a discount on a length of stay rate type if it is greater than the overall average length of stay for your business.
- Consider your operating costs. Is a non-peak rate for sale worth opening your front office on a public holiday for? Closes to arrival or departure works great for this.
- Based on your business statistics, should your rate increase or decrease the closer to the arrival date it gets? There is no right or wrong answer but traditionally it would increase.
- Is your competitor set a like for like product? What is your value proposition? Should you be priced above or below your competitors?
- Are the online channels you connect with performing? Work with your market manager to gain your fair share or dominate the market. If the channel is still not performing, perhaps there are others that will benefit you more?
- What are your value adds compared to your competition?
- Your people are your greatest resource. Making sure your front-line team is trained to maximise revenue is often the best with delivering INSTANT results. Do they have want, wish and walk rates? Are they trained to be constantly upselling? Offering that rebook, promoting the next category up on all guest correspondence prior to arrival, securing that membership sale and creating the sense of urgency for direct booking enquiries. But most importantly…. converting that OTA customer to a direct customer!
- Does your business have a sales culture? Make it an exciting game that the entire team are motivated to work towards. If you are making extra $$$ by this push, why not have an incentive? It is only going to continue driving your business.
- Do you segment your customers? How do those segments book? Can you maximise your average rate by managing your rates per segment?
An example of the above:
You can offer a low cost add on – early check-in, or late check-out with a $20 fee, if this offer is taken up by only 1 guest a day this can be an additional $7300pa with very little extra effort or cost if any from an operator prospective.
Will all these work for your business? Absolutely not. Will some? 100%. And there are so many other objectives to try in addition to this. Feel free to reach out to the MOM team for some tips. Our team have managed revenue across many different business types both within and outside of the tourism industry.
Thanks for reading this and I'm more than happy to discuss any of this with you.