By Steve Lapekas


In any industry, the measure of a brand’s success can be attributed to a number of factors, but perhaps none more important than revenue. In simple terms, a business is either profitable – or it’s not, and the ability of a company to consistently drive profit will, in many ways, determine the likelihood of its success and staying power.

Let’s take, for example, Shark Tank, the popular reality TV show in which bright-eyed entrepreneurs pitch their business ideas to a panel of venture capitalists in the hope of securing investments and business advice from them. Throughout each episode, viewers are introduced to a variety of ideas and products while five ‘sharks’ watch on stoically before firing off a barrage of hard-hitting questions to determine if the business is, in fact, viable and worthy of funding. While there is no shortage of clever or otherwise memorable ideas presented to the panel of business experts, the line of questioning always comes back to revenue potential and profitability. In the world of business, revenue doesn’t lie, and it should be every business owners’ foremost priority to manage effectively and, in turn, optimize revenue.

Just as you can’t manage what you can’t measure, you can’t develop or improve what you don’t manage. Revenue management is not a passive pursuit or consideration; if you take your hands off the wheel, it’s very likely that the car will drive off the road. Hospitality is no exception, as hoteliers must invest in tools and processes that automate key revenue strategies. These tools, in a sense, place hoteliers back in the proverbial driver’s seat – but in a self-driving car that can seamlessly navigate the road ahead.

From fluctuating supply and demand, advance bookings, last-minute cancelations, rate disparity, low-cost competition, and more, hoteliers are encouraged to adopt a more holistic and automated approach to revenue management. In fact, in the world of hospitality, there is, perhaps, no single tool more essential to hotels’ profitability than revenue management.

Revenue Management 101

Suppose every traveler has a ‘maximum value’ they can bring to their next hotel booking. In that case, it is the responsibility of that hotel not only to identify that value but to capture as much of it as possible. Will this guest be interested in upgrades or upsells; if so, what ones? Will this guest want flexible check-in/out or possibly extend their trip? Are they traveling for business, and if so, is there an opportunity to enrich their stay with a leisure activity? Are they booking through an OTA, or are they booking direct?

In simple terms, effective revenue management requires a hotelier to extend the right offer to the right traveler, at the right time and for the right price, via the right channel. Understandably, this is no small undertaking, as there are a number of moving parts to consider, and every guest is unique. Fortunately, revenue management technology helps take the guesswork out of it by breaking down guests based on various factors, including the type of traveler, geography, seasonal trends, demographics, industry trends, etc.

With this data, a hotel Revenue Management System (RMS) can effectively glean critical insights that inform forecast demand, real-time pricing, and availability adjustments based on occupancy, seasonal trends, weather, world events, booking pace, and competitive data. By leveraging historical and real-time data and insights, hoteliers can better drive profitability and increase the relevancy of offers. It’s essentially like giving your revenue manager the key to solving a puzzle – where they would otherwise be left to interpret pieces without the appropriate context and birdseye view. Moreover, effective revenue management helps hotels avoid over-staffing during slow periods, ensures properties are adequately staffed when needed and allows hoteliers to manage resources to capitalize on guest demands and expectations. Using an RMS with real-time analysis capabilities will enable hoteliers to move away from an era in which they made pricing decisions and offers based on ‘gut feelings’ and could make intelligent, precise business decisions that directly benefit their bottom line.

Revenue Management is a Changed Landscape

While discussions of the pandemic and, conversely, the post-pandemic landscape may seem to be on a relentless loop within the hospitality industry, our attention to the complexities of this period of time is undeniably justified. The hospitality industry has changed, and our understanding of ‘business as usual’ fell away some time ago. An altered landscape requires a modified approach, and now, more than ever before, we are witnessing hoteliers loosen their grip on legacy tools and processes in favor of more future-proof solutions.

Revenue management practices are being considered in a new light as hoteliers grapple with heightened guest expectations, industry pressure, increased competition, and rapid changes in the marketplace. Without the right technology, hotel brands, regardless of size and scale, are simply ill-equipped to effectively manage – let alone optimize – their revenue and respond quickly to market demands. And while some hoteliers may have assumed, in an ill-advised fashion, that an RMS became obsolete. At the same time, travel came to a grinding halt during the pandemic. The RMS instead derived renewed importance. Across an increasingly volatile landscape, hoteliers need to make informed pricing decisions that are constantly reviewed and updated based on real-time data and insights. As historical data and trends became irrelevant, hoteliers realized they needed tools with the ability to accurately forecast the future amidst this new normal.

Fortunately, a cloud-based RMS can do precisely this, offering hoteliers real-time pricing and availability adjustments that seamlessly integrate with existing systems to ensure decisions and recommendations are made based on all available, reliable data. Inline revenue management systems process each transaction in real-time through the pricing engine and automatically maximize revenue by carefully managing forecasting, availability controls, groups, and distribution.

Moreover, an RMS allows hotels to make informed decisions with confidence, operate efficiently during a labor shortage, price competitively regardless of industry circumstances, and get creative with their marketing while identifying and maximizing ancillary revenue streams. This is an increasingly important consideration, as the average full-service hotel gets about $10,000 of revenue from food alone every day. As our industry collectively recovers and thrives again, hotels can leverage their RMS to automate revenue best practices for all revenue streams, including F&B, on-property services and amenities, and so much more. In this way, the automated yielding offered by a next-generation RMS is more than a game-changer for hoteliers – it’s an outright necessity for survival and long-term success.