Revenue Management

Offer the right room to the right customer at the right price, at the right point in time

The Beginnings of Revenue Management

The strategies and technologies on the topic of Revenue Management has significantly evolved over the last years and are constantly transforming. The airline industry was the first to introduce the concepts of Revenue Management and Dynamic Pricing. These were applied to react in the best way to different customer needs and changing demand. In 1978 the First-Mover American Airlines developed an innovative tool to very accurately predict the customer’s demand and optimize their pricing. Nowadays, Revenue Management is indispensable to the airline industry.

Since this disruptive invention, many other sectors have adapted to work with intelligent prices. Dealers in the e-commerce sector - like the pioneer Amazon - have since long ago successfully relied on prices which are adjusted on a daily or even hourly basis.

Similarly, we can increasingly observe the usage of Revenue Management in the hotel sector. In the late 1980s, the first hotels started achieving high profits by applying the technologies and strategies of Revenue Management. The Marriott Hotels were forerunners in the hospitality sector. By now it is already a common practice in the city hotel industry to determine prices dynamically depending on external factors such as demand, booking data, and channels. Also in the leisure hotel industry, managers increasingly rely on Revenue Management and Dynamic Pricing tools.

What is Revenue Management?

Broadly speaking, Revenue Management is all about increasing revenues. The idea itself is very straightforward: to offer the right room to the right customer at the right price, at the right point in time.

Revenue Management helps hotel managers to understand the guests and the booking behaviors. It enables them to flexibly react to the customer demand and act with foresight without great effort. This enables the hotelier to keep track of supply and demand at all times, identify fluctuations at an early stage, and always stay one step ahead of the competition.

For the calculations, experts use comprehensive analyses and data to predict demands to make the right pricing decisions and optimize the profit. It involves factors like past and current bookings, weather forecasts, tourism KPIs and many more.

In the hospitality industry, we can identify capacities that are rigid or unchangeable in the short-term, such as beds, and  demand fluctuations. Hence, costs of unutilized capacity might occur. A Revenue Management tool with intelligent pricing is perfectly suited to avoid these costs.

Outlook Leisure Hotel Industry

Especially in uncertain times of crisis, Revenue Management becomes even more important. The booking behavior and the guests are constantly changing and short-term bookings, as well as cancellations, are increasing. For this reason, it is essential to permanently adapt to changing situations and to think innovatively.

Revenue Management constantly  evolves with the help of digital tools. The transformation to an automated Revenue Management software is easier than ever before. Due to technological advancements, the hotelier can save a lot of time through easy handling, achieve higher returns and make calculated decisions.

We are looking towards a digital future. Innovation and digitalization may seem uncertain at first. However, it is high time to innovate and transform the leisure hotel industry with Dynamic Pricing and Revenue Management. It is a fundamental step to assert oneself in the vulnerable tourism industry, to be one step ahead of competitors, and to be well prepared even in times of crisis.