The hospitality industry continues to suffer in every corner of the globe - what else is new? Most hotel experts are expecting a slow 2010 recovery in RevPar. In such an environment, many hoteliers will struggle with rate discounting, creating more pain for the long-term development and sustainability of hotels' revenues once the economy gets back on its feet.
So how can hotels compete in this frail economy, looking beyond discounts? Is it possible for hotels to prosper, even during a global travel slowdown? The answer is yes! An essential building block of revenue management, RevPar is one of the most important metrics of the hospitality industry and thriving in a weak market is entirely possible with the right system in place.
Back to Basics
So first things first, what is revenue management? Wikipedia defines it as 'the process of understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource (such as airline seats or hotel room reservations).' So in hotel revenue management, managers must decide what the optimal price is for a room taking into consideration the following items (among many, many others) to ensure optimal RevPar (revenue per available room):
- Historical data
- Competitor's pricing
- Booking window (shrinking dramatically)
- Forecasted occupancy
- Force of demand
- Page positioning
- Special events, city wide conferences, etc.
For hotels, RevPar is a key determinant of profitability. It's what keeps the doors open, yet many hotels and chains still handle room occupancy and pricing in an old-fashioned and disorganized manner - reactively and rarely scientifically - something which is beginning to change as savvy hoteliers embrace
online algorithmic software solutions tools that will automate the revenue management process while allowing full customization, complete control and accurate distribution.
Think of it this way - rather than having a team of revenue managers spend all their time decoding endless reports and constantly updating prices (or going the other way and losing out on valuable revenue because they are not staying competitive), automating the process will ensure that the job gets done properly (and that prices are updated in real time). Online competitive yield pricing
sales and distribution systems that optimize rates and bookings in real-time will ensure that revenue managers are in control and have time to focus on the bigger picture of strategic business development, including proactive (rather than reactive) rate strategies, yield management, opaque systems, social media tactics, OTA market manager relationships, promotions, packaging, implementation, group values, and the list goes on.
With the
right technology, hotels can increase their occupancy rates, boost RevPAR and manage their distribution costs like never before. Rather than blindly discounting in an effort to increase bookings (and decreasing their profit margins in the process), they are optimizing their pricing and their online presence for increased bookings and revenue. They are thriving even as consumer and business travel continues to decline. So now the only question is - will you be one of them?
