A New Year, Renewed Focus and Best Revenue Management Strategies for 2010

Jan 20, 10 | 1:58 am

By Bruno Perez and Jean Francois Mourier

For hoteliers in 2010, very few aspects of daily and strategic operations are going to be as crucial as revenue management.  Of course, revenue management is important at all times but as the new year gets underway with a stronger recovery mentality - and about time too - it is especially important now: demand for hotel rooms is forecasted to increase only slightly more than 1%, and occupancy to essentially remain unchanged this year[1]. It is vital, therefore, for individual properties to effectively manage their revenue streams to remain competitive and, well, keep the doors open for business.  This means optimizing rates, managing multiple sales channels, embracing new and innovative revenue management techniques and technologies, and using as much information as possible to get the best rates from every booking. 

So how will hotels achieve efficient revenue management as the year unfolds?  Here are a few of the most promising strategies that are likely to impact the practice of revenue management in 2010.

New Systems

Technology is the old standby: advances in systems tech are commonplace, but are by definition, always new.  In terms of revenue management, the rise of comprehensive rate optimization systems that coordinate sales across multiple channels and use complex sets of information to optimize pricing in real time are changing the industry landscape in 2010 in a very big way.  These systems  are enabling hoteliers to move away from history-based, manual rate setting to squeeze every dollar possible from their sales.

Multi-Channel Management

OTAs and other online sales channels remain the key growth centers for hotel sales - online bookings represented more than 70% of all travel bookings last year[2] - yet the sheer number of third-party sites can make managing rates across these platforms challenging.  In 2010, hoteliers will place more emphasis on managing their inventory effectively across multiple channels, largely through the use of comprehensive revenue management systems.

Transparency and Trust

Though opaque sales techniques may seem like the clearest path to rate optimization, a recent Cornell study[3] found that consumers actually prefer to know the rationale behind rate changes.  It's logical when you think about it as transparency can lead to increased trust. The study also indicates that increased transparency - though not complete disclosure of all pricing practices - may actually lead to higher booking rates. If this consumer sentiment takes hold, increased transparency may become a viable pricing strategy for 2010.

RevPAR Resurgence

2009 was the year of salvaging occupancy, a damaging trend that came to life as substantial rate cuts enacted by the major chains.  In contrast, the emphasis in 2010, as occupancy slowly ticks back up (PwC predicts only an incremental rise in occupancy across the US to 55.8% for 2010), will be more on RevPAR. This follows the logic of doing more with less; the demand in the 2010 market will be such that artificial occupancy optimization measures (like deep discounting) will be unsustainable, making RevPAR the only metric that matters.  And with RevPAR off more than 16% off last year, this will happen not a moment too soon.  Look for hotels to do all they can to bolster their RevPAR figures, from improving or updating their revenue management systems to offering new ancillary services.

As hotel industry insiders we certainly hope to see new, unlooked-for developments that shake up the industry this year for the better, of course.  This brief list, therefore, may just be the starting point.  But by our estimation, the above four strategies represent the best way forward for the hospitality industry in terms of revenue management.  And if revenue management is the watchword of 2010, these four strategies will become very important for the entire lodging industry over the coming year.

Cheers to a prosperous new year for the entire industry!
Bruno Perez and Jean Francois Mourier,
REVPAR GURU

To contact the writers, Bruno Perez and Jean Francois Mourier of REVPAR GURU, for additional commentary or interviews, please contact Jennifer Rodrigues at jrodrigues@thinkinkpr.com or 305.749.5342 x 234.


About REVPAR GURU

REVPAR GURU provides hotels around the world with an alternative revenue management software solution, to manage RevPAR intelligently and effectively, and deliver maximum profits. REVPAR GURU's custom-designed Yield Dynamic Price Engine meets the rapidly changing needs hotels in a demanding business environment - dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management, and GDS sales distribution, to increase a hotel's RevPAR while maintaining rate integrity and automated rate parity. It is the only revenue management solution that automatically optimizes and updates hotel rates across all major consumer travel websites, based on all market variables and in real time, and provides a strategic room inventory control.  Once deployed, hotels can boost their occupancy rates and cut their distribution costs dramatically.  Headquartered in Miami, Florida, additional information can be found at www.revparguru.com or by calling +1.786.478.3500.

[1] PKF Hospitality research. 2010 Occ. forecast: +0.4%

[2] J.D. Power and Associates 2008 Independent Travel Web Site Satisfaction Study(SM).

[3] http://www.chr.cornell.edu/