Revenue management has a lot of advantages for the hotel industry. It can be defined as “The skills of maximising yield by differentiating the price and by allocating parts of the available production capacity across the various price classes ” (Peelen, E, 2013). In other words selling the Right product to the right customer at the right time for the right price through the right channel (Snapshot, 2015).
The development of such system requires a lot of information, such as historical booking patterns, current booking information and accurate predictions on the bookings. The airline industry was one of the first industries that used such an application. The American Airlines had increased their revenues by 5 to 10 percent after they introduced revenue management (Peelen, E, 2013).
As the hotel industry is a very dynamic industry, having a revenue-management system is almost crucial. Besides the basic advantages like increased revenue and strategic pricing, there are many more benefits of using such a system. First of all, a revenue system lowers costs. As the room rates differ every day due to the season, region, the age of travellers and other economic factors it is very important to have a revenue strategy for periods of higher and lower demand. As a result, a hotel can plan ahead and manage its resources and therefore lower costs by avoiding unnecessary expenses.
Secondly, a hotel is able to attract the “ideal guest”. Attracting new guests costs more than to attract repeat customers again. Even though a hotel might be fully booked this does not mean that it is profitable as the hotel might have sold the rooms for a very low rate which makes them lose money during maximum occupancy. The revenue- management system can help hoteliers to identify the right guests that can give the hotel long-term value. The system evaluates the spending activities, such as the amount of money spent in the restaurant, bar, the gift shop and obviously the price paid for the room.
Finally, revenue management improves branding. This system can play a big role in increasing the bottom line of a hotel. It improves not only the occupancy but ensures that the hotel sells its rooms at the highest possible price and generates the maximum RevPar at all times (Kyran Sunny, 2015).
To finalize this blog a successful example will be provided. Marriott International, the pioneer in its industry to implement a revenue-management system. For several years, it has used this system for individual bookings. The system provides hotels detailed demand forecasts, optimal inventory allocations, and a seamless interface to the reservation system that executes these control policies. In 2005 already 97% of the hotels used this system. It handles more than 75 million transactions per year, which makes it a rich source of information about individual transactions. After this success, Marriott introduced its Group Pricing Optimizer (GPO), a revenue-management system that helps the sales force to get the right price for group bookings (Sharon Hormby, 2015).
Kiran Sunny. (June 13, 2016). Uncovering The Significance Of Revenue Management For Hotels. Retrieved from:
Peelen, E., & Beltman, R. (2013). Customer relationship management. Harlow: Pearson Education
Noopur Sharma. (February, 2015). Hotel Revenue Management and Its advantages and Disadvantages to Organization, its employees and customers. International Journal of Scientific and Research Publications
Snapshot. (November 16, 2015). Understanding the Basics of Hotel Revenue Management. Retrieved from:
Sharon Hormby, Julia Morrison, Prashant Dave, Michele Meyers, Tim Tenca. (2010). Marriott International Increases Revenue by Implementing a Group Pricing Optimizer
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