Like any business, hotels rely on revenue. Hotel revenues are complicated as they rely on several income-generating factors such as room rates, average occupancy, and market demand. A hotel’s revenue stream can fluctuate greatly with changes in demand or customer behavior.
That is why hoteliers must have an experienced revenue management service on their side. The hotel industry is competitive and everchanging, and revenue managers help hoteliers attract new business while stabilizing current income streams.
A revenue management service is a company that will help hoteliers maximize their revenue potential. They have various tools to help hotels maximize occupancy. Hotel revenue management is such a critical aspect of running a hotel that hoteliers must choose a skilled revenue management service.
Functions of a Hotel Revenue Management Service
The overarching function of a hotel revenue manager is to increase revenue through multiple different channels. In addition to researching ways to bring in new business, revenue management services also look at current business and streamline functions for maximum income.
To do this, hotel revenue managers will perform many tasks. Some key functions of a hotel revenue manager are:
- Using hospitality data gathered from your hotel, revenue managers will analyze historical performance and trends. Using this information, they will suggest strategies to improve the business.
- Analyze pricing and distribution strategy.
- Build and maintain a good rapport with OTA managers to ensure high-quality marketing on OTAs.
- Monitor your hotel’s online reputation, scanning for trends in customer concerns that can be mitigated before they stain your hotel’s reputation.
- Analyze day-to-day business performance to identify any yielding gaps.
- Communication effectively with hotel management and staff to give them a clear vision of their plan and goals for the future.
In total, the various tasks a revenue manager will provide your hotel all amount to one central goal: increased revenue.
Why You Need a Hotel Revenue Management Service
Hoteliers have various responsibilities and can’t focus their full attention on the financial health of the business all the time. However, a revenue management service only focuses on the financial aspects of your business. When you hire a hotel revenue manager, you ensure there is someone always analyzing and improving your hotel’s income.
In addition to the value of having a dedicated revenue expert, there are other benefits to hiring a revenue management service. The hotel industry changes constantly and can be quickly affected by societal events. This causes hoteliers to struggle with less predictable demand patterns and rapidly changing guest expectations.
A hotel revenue manager can forecast certain trends and patterns to prepare your hotel for the future. Revenue managers can help hoteliers make big decisions as to whether they should invest in more rooms, add new features to current assets, or adjust their room pricing.
Hotel revenue managers understand the hotel industry inside and out. They can look at the hotel (or portfolio of hotels) through a purely financial lens and suggest courses of action that will produce the best outcomes.
In-House Revenue Manager Vs. Hired Revenue Management Service
Effectively managing hotel revenue is challenging, due to it being such a fluid industry with many moving parts.
Today, many app-based services promise to give you insight into your revenue management, but technology can’t replace a dedicated expert when it comes to revenue management.
When choosing a revenue manager, there are basically two options: in-house or third-party. Many hospitality companies make the mistake of hiring an in-house revenue manager. Hiring in-house makes sense on paper because companies assume they can teach an in-house employee everything about the business, and count on them to be around for years to come.
Those points may be true; however, there are many downsides to hiring an in-house revenue manager.
Some downsides of hiring an in-house revenue manager to consider are:
- In-house employees take lengthy onboarding processes and training to bring onto your team. When you hire an outside specialist, you get immediate access to their expertise and can focus on other employee needs within your business.
- In-house employees need to be paid for all hours worked and typically have set schedules. Hiring an in-house revenue manager means paying a salary, monitoring another person’s hours, and making desk space in the office. With a third-party revenue service, they can bill only the hours they need to get the task done and work from anywhere.
- In-house revenue managers will likely expect a set salary with benefits just as all other employees get. Therefore, hiring a revenue management service is often much more cost-effective. You only need to pay them for the hours worked and do not need to provide benefits or PTO.
When you hire an outside revenue management service, you get quicker results and spend less. Those who work for revenue management service companies are experts in their field and only focus on financial management, day in and day out. So, when you hire a revenue management service, you ensure the person working on your hotel revenue goals has a sole focus they are knowledgeable in.
Challenges of Hotel Revenue Management
The reason it’s highly suggested to hire a specialized revenue manager for your hotel is that hotel revenue is complicated to analyze. Hotel revenue depends so heavily on the season, trends, world events, and more.
Revenue managers are taught to accurately forecast their revenue using models which account for potential drivers of change in customer behavior. Many competing factors need to be considered when looking to optimize a hotel’s revenue.
Some examples of factors that can affect a hotel’s revenue potential are:
- Inflation and/or state of the economy (fewer people will travel when money is tight)
- Competition in your area
- New trends in traveler wants and needs
- Room rate volatility
- And more!
With so many factors to consider, it can be very hard for someone without advanced revenue management skills to efficiently manage all the moving parts. Leaving your hotel’s revenue in the hands of someone who doesn’t have the right expertise can have drastically negative effects on your hotel’s success.
To run a successful and profitable hotel, you need a revenue manager. To get the most for your money, and the most expert revenue management, you should look to hire an outside revenue management service provider. In-house employees rarely produce the same results and can be more costly to employ.
Don’t leave your revenue up to chance! When you invest in a revenue management service, you ensure your hotel is being analyzed and monitored by people who deeply understand what drives revenue and how to increase it.