Hospitality revenue growth has climbed in recent years, showing an average 7.5% annual increase in just the past two.
It's great news for an industry that experienced a major 14% revenue drop in 2009. In fact, 2015 marked the industry's highest revenue growth at $189 billion, proving that the integration of hotel revenue management is nothing to sniff at.
Hotel revenue management uses techniques to better forecast consumer behavior amongst your own guests and the market as a whole. It also includes budgeting and tracking to cut down on wasteful spending.
In short, good revenue management prevents money from falling through the cracks and will increase your ROI.
Generally speaking, Revenue managers do the following:
Identify opportunities to generate more revenue
Work with marketing to implement strategies to profit from those opportunities.
Effectively manage hotel resources to cut down on costs.
Track and analyze current and prospective consumer behavior.
More hotels are starting to embrace this full-focused approach to revenue and seeing immediate improvements in their return on investment.
Take note of these top 5 strategies hotels are using right now:
Identify Opportunities Within Your Guest Network and Beyond
You know that happy guests are everything to your industry, but you may not be capitalizing on the right opportunities within your own guest network.
Guest services don't begin and end at the front desk.
Instead of looking at your guests broadly, analyze their individual spending and booking activity. This is how you'll maximize their business.
This way, the revenue management department can work directly with marketing to create targeted strategies to keep your big spenders and frequent guests extra happy.
Here's an example:
Suppose you have a family that books 6 rooms per year for their annual family vacation.
They're obviously a big money maker as is. Why not create more opportunities for them to spend more money with you?
Consider these ideas:
Celebrate their 5th annual family vacation at your hotel with a complimentary mini bar.
Analyze which days they book the most, and call in advance to ensure they book before someone takes their favorite room/time block.
Establish a loyalty points program that rewards the family for spending a certain amount per year.
Run promotions that encourage them to spend a higher amount to receive goodies like free breakfasts.
Partner with local businesses to provide vouchers for tourist activities, kids activities, or restaurant coupons.
Provide special discounts on off-season rates. (This works especially well for resorts.)
Send them personalized cards and discounts on their birthdays.
Provide discounts for referring a friend or family member.
You should also take this time to upgrade your technology to better manage your guest services strategy.
New software can help you create databases with contact information, log room service requests and track resources to create better customer experiences.
Include Market Segmentation Into Your Hotel Revenue Management Strategy
You just learned the importance of breaking down your guest network to identify more profitable opportunities.
This leads right into our next strategy: market segmentation. This breaks down, or segments, your market into identifiable opportunities.
Market segmentation breaks down your market into four distinct categories:
It's important to have a strong grip on who your current and potential customers are. Therefore, you need to look at these four categories and analyze the shared characteristics within each category.
These may include common interests, common needs, or shared lifestyle characteristics.
Suppose market segmentation reveals a major increase in bookings from the 18-24 age bracket. That's a clear opportunity to cater to that market to increase revenue.
By analyzing the location, demographics, psychology, and behavior of your current and potential guests, you'll have a much clearer picture of the following:
Average length of hotel stays
Which days are more popular
Average profit per room
Average booking lead time
Nail Down The Right Rates For Your Hotel
In an effort to increase sales, many hotels make the cardinal mistake of making their rates too low.
This does not play out well in the long run. While it's beneficial to provide discounts for frequent or high-spending guests, you don't want to sell yourself too short.
Think about it: A luxury brand wouldn't be a luxury brand without that hefty price tag. Just like the Ritz-Carlton wouldn't be as valuable without its average rate of $500 per night.
Likewise, most middle-class families wouldn't stay at a "family-friendly" hotel with exorbitant rates.
You need to nail down a rate that makes sense for your hotel. Moreover, you also need to understand the right time to increase those rates as well. Guests grow frustrated with ever-changing rates, so be mindful of how much you increase.
This is where market segmentation research comes in handy. When you have a good understanding of your most customer profiles, you can better predict and cater to their rate expectations.
There are also many tools you can use to maintain the right rate parity.
Track Your Competition On Social Media
Another important piece is understanding your competition. You don't want to be oblivious to your competition, you want to track them.
Take note of these important methods for keeping up with your competitors:
Social media: Track your competition's marketing strategy on Facebook, Twitter, or Pinterest.
Online review websites: Remember that guests love to speak their mind! Learn what people are saying about your competition by analyzing their reviews. 80% of the time, guests will look at online reviews before booking.
Referrals: Does your competition partner with any local businesses or travel guides online?
Online reputation management: This is an interesting one. You should track how your competition responds to negative feedback. This can help you gauge how strong their customer service strategy is.
Social media marketing apps make fantastic competitor tracking tools because you can watch their activity in real-time.
How does your competition use social media to drive revenue?
Do they have a shoulder season strategy?
What their customer service style on Facebook?
Do they run exclusive promotions on social media?
Do they invest in Facebook advertising?
Some hotels even create hashtag campaigns to get guests in on the social media fun. This is a great way to get your own guests to spread the word about you on social media. Free promotion never hurts.
And, the best part?
Social media is one of the most cost-effective marketing methods you can find.
Set Achievable Goals
Are you setting enough business goals at your hotel? Better yet, are you setting the right goals?
Making decisions on impulse is a revenue killer, but the S.M.A.R.T goal formula helps you set profitable goals you can achieve.
S.M.A.R.T stands for:
Apply the S.M.A.R.T goal system to both your frontline and internal business strategy to maximize ROI across the board.
Another helpful tip is changing the way you think about your budget. Don't craft your budget around annual percentage increases in revenue. Build it around your expected daily revenue. This way, you can adjust your budget when needed and avoid unexpected overages at the end of the year.
The industry is on the upswing again, but not without the help of robust hotel revenue management. Speak with a consultant today to nail down a revenue strategy that saves you money, makes the most of what you already have, and attracts the most profitable opportunities in your market.
I'm busy working on my blog posts. Watch this space!