17 September 2024

How does revenue management help increase revenue for hotels?

Let's dive into how revenue management can increase revenue for your hotel. When you speak to a revenue management software company, they all tell you the same story: "Work with us because your room revenue will increase by up to 25%." And, while this is actually true of RevControl 😉, you might still be sceptical.

So, how does revenue management in the hospitality industry actually work? The secret to increasing hotel room revenue lies in the calculation and management of recommended rates and the frequency at which they are sent to your reservation systems.

The basis for revenue management is dynamic pricing. Here’s what happens in our system: RevControl calculates the recommended rates up to four times an hour and sends these rates to your PMS or channel manager. Our rate recommendations are two-pronged, meaning on one hand we analyze your existing performance using data from your property management system and calculate an accurate forecast for the upcoming year. On the other, we also look at your competitors' rates and their pricing strategies. By controlling both internal and external factors, we ensure no room revenue potential is left untapped. Initially, we set a rate based on your own forecast to make sure you're on track to achieve your targets.

However, if rates in the market are incresing, RevControl recommends a higher rate than the one based on your forecast. Likewise, when market demand is low, rates drop accordingly, and RevControl recommends a lower rate to boost your reservations. For your peace of mind, you can also set a minimum rate which RevControl will never go below.

To answer the main question of this blog post then: a revenue management system ensures you utilize the full revenue potential of each room. When your own forecast and market rates are high, the recommended rate will increase. However, don’t be afraid to lower prices when market demand is low. A hotel room can be sold only once per night, and if it remains empty, the revenue remains zero. The more often a revenue management system sends rates to your PMS, the more accurate your pricing strategy will be.

For us, increasing room revenue by up to 25% isn't just a sales pitch. Automated revenue management truly harnesses room revenue potential, leading to these impressive results. By leveraging real-time data and dynamic pricing, you can achieve significant revenue growth while the revenue management system does the work for you!