Top tips from revenue experts on building a smart and profitable pricing strategy
As part of our Trends and Challenges webinar series, we invited three revenue experts from RoomPriceGenie, Pace Revenue and Hospa to discuss the shift in revenue management strategies and how properties in the UK/EU can optimise revenue performance.
Here are some of the key learnings to help you build a smart and accurate revenue strategy that boosts your profit at every opportunity.
Leverage the return of the local travel boom
With many restrictions around international travel still in place, there is likely to be a high demand for staycations, similar to last year’s surge in domestic travel, particularly over the summer months. When setting a rate strategy, Clément Auffan from Pace recommends staying away from drastic changes in price points. “At the beginning of COVID, we were advising hoteliers not to drop their rates, and it’s even more important right now,” says Clément. “I’d advise you to keep a normal rate but prepare and focus more on making sure your guests feel safe.”
Introduce a reactive and flexible revenue strategy
People often associate revenue management with a drop in rates when demand is low, but that’s not always the case. In the current climate, forward-thinking operators should be looking ahead and increasing their rates based on their upcoming demand.
“Look into your PMS to see what’s happening over the next six months," recommends Marvin Speh from RoomPriceGenie. "Identify days when you are over 50% occupancy and increase your rates by £10, or when you’re over 80% occupancy, increase by another £10.”
“Be reactive, be flexible with your strategy, don’t be afraid to change things. Because especially in uncertain times like today, being flexible is the right answer to the problems you’re facing.”
Marvin Speh, Co-founder of RoomPriceGenie
Leave CompSets behind
Traditionally, revenue managers have focused on CompSets and historical data to drive their pricing strategies. However, after comparing historical and primary PMS data, Clément and the Pace team found that utilising real-time data from your PMS is generally a much more accurate way to calculate future demand. Another advantage of using primary data is that the revenue management algorithm can quickly adapt to trends (such as COVID), enabling you to maximise your revenue at every opportunity.
Dismiss the myths
While we’re on the subject of leaving things in the past, let’s throw some myths in there too.
Myth 1 - Since the pandemic, revenue management has become unnecessary
Actually, the opposite is true on this one - revenue management is thriving because of COVID, particularly with smaller rural properties that are seeing a huge influx in demand and are using their revenue management strategy to sell their rooms at a higher price point.
Myth 2 - Revenue management systems are only for big hotels or chains
False again! Any accommodation business with perishable products (i.e. sites, rooms, apartments or beds) can use a revenue management system. Statistically, the systems are dominant in the large hotel space, however with the peak demand for staycations, smaller properties are rethinking their revenue and realising more profit can be made by getting the pricing right.
Myth 3 - Revenue management systems are complicated
Using the latest advancements in technology, revenue management systems are designed to be user-friendly, regardless of your computing ability. There is no sudden jump into automation; instead, there are guided steps so you can increase your revenue management skills as you go and gradually introduce into your revenue strategy.
“A revenue management system has never been more valuable than it is at the moment.”
Jane Pendlebury, Chief Executive at HOSPA
5 top tips
- If you’re completely new to revenue management and want to start slowly and manually, look into your booking situation on a weekly basis and determine an approach that you can regularly execute (e.g. when future occupancy is over 80%, increase rates by x amount).
- Ensure you have a revenue management strategy in place whenever there is even the slightest demand so that you can effectively optimise your pricing based on that existing market interest.
- Be aware of your competitors’ rates, but at the same time, believe in your pricing and have confidence in what you are selling.
- Don’t be afraid to increase your rates during high demand periods.
- Combine your revenue management strategy with guest loyalty - properties that are experiencing a swell in demand need to nurture their guests to encourage them to return next year when domestic demand will likely drop due to international border reopenings.
To sum up, revenue management has both a strategic and tactical element to it - as humans, we can drive the strategy, but the latter really requires more than what humans are capable of. The tactical side is all about dynamically pricing your inventory and reacting in real-time, which a machine can do much more effectively than a human.
Catch-up on the webinar on-demand: