Beginner’s Guide to Hotel Revenue Management

Published on
September 15, 2021
Team Stayflexi
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Hotel Revenue management is not just a question of ‘How much money should I save and how much should I spend?’ As a hotelier, you should know that this is a business where investing ample money is a necessity. Guests choose your establishment only if they feel like you’ve put in more than enough effort to please them.

You will have a substantial operational cost if you run a hotel. After all, you have to pay your employees, pay for the utilities, for the marketing, and more. And there is no way to cancel out these expenses. But what you can and must do is have a firm grasp of the nuances of how your hotel makes money.

A lot of the decisions that former hoteliers took were based on guesses and their own experience. For example, hotels often vary their pricing of rooms based on whether or not they think there will be a holiday rush.

However, as you can well understand, all such bets are off in a post-pandemic world. Even the most concrete of seasonal trends are being shattered due to the abrupt travel bans. Therefore, you basically have no data to base your pricing decisions on.

In such a situation, you have to modernize your approach to obtain relevant data. This is a beginner’s guide on how to manage your hotel revenue most effectively. After all, you do need to make a profit, right?

Ten Best Ways to Reduce Your Hotel’s Operational Expenses

Dynamic Pricing

A lot of hotels boast of having various categories of rooms like Standard, Executive, Deluxe, etc.

Did you know that the Deluxe room in the peak season turns into Standard in other seasons?

Never have fixed pricing for your rooms. The reason for this is simple. Your room pricing, much like any other product in the market, should depend on demand.

How do you understand the demand, though? You have to check the prices of all the neighboring hotels. But this is almost impossible to do manually. Thankfully, there are Property Management Systems (hotel software) that will do this work for you.

And not just this. Seasonal changes might be something that you are prepared for. But did you know that you often have to make hourly changes to your pricing?

Yes, when your hotel is almost completely booked, you need to increase the pricing immediately. Since this can happen at any unpredictable moment, this change of pricing can be incredibly difficult to implement manually. A PMS, like StayFlexi, allows you to update the pricing in no time.

In fact, if you update your occupancy goals, StayFlexi will automatically update the pricing when that occupancy is reached.

But that’s not all. Seasonal and hourly changes are not enough. You have to pay attention to the trends of booking that you can optimize.

For example, a lot of hotels offer discounts to people who book rooms for a longer duration. They do this because of two major reasons:

  1. If you have long-term guests, your hotel is more likely to be fully booked. Fluctuating guests do not contribute to a high occupancy percentage.
  2. If you incentivize longer stays, you can club high-demand days with low-demand days. Low demand days refer to days when your rooms are likely to remain empty. By encouraging guests to stay longer, you can even out this discrepancy between various days.

There are also times when you should not take bookings. As strange as this sounds, you must say no to some guests to increase your revenue.

For example, say there’s a concert that is supposed to be organized in a nearby hall/stadium on Saturday. The concert-goers are obviously going to look for hotels to stay over for the weekend. In this situation, you should consider employing some Stay Control measures. What this means is that you must inform your guests of a Maximum Length of Stay beforehand. That is, they must be informed that they have to check out by Friday. Only then can you accommodate the concert-goers. And since you are sure to have a high demand for rooms, you can accordingly increase the pricing.

But for pulling stunts like these, you need hard data to back your decisions. Or you might end up losing a lot of revenue. A PMS makes decisions such as these incredibly easier since it can predict these patterns accurately.

Efficient Staff Management

Don’t ever consider paying your staff less to save money. This is simply not going to work out because almost all hotels stand on the foundation of good housekeeping. No matter how much of a discount you’re getting, you would not stay in a dirty hotel room, would you?

The hotel industry has suffered immensely during the pandemic. Hotels were forced to let go of a large portion of their staff because of the falling demand. This article by Business Insider talks about how 1 in 3 hospitality workers are not planning to return. They wish for better wages and benefits than the industry can offer.

Of course, their demands are justified. And so hotels have indeed increased their wages to retain them. However, if you have to increase your employees’ pays during a crisis period, you also cannot go overboard with the recruitment.

The goal is to utilize the skills of the limited number of employees you have. You must also learn how to properly assign tasks. Overworking them due to labor shortage is not an option.

In such a situation, a Property Management System like StayFlexi can be your savior. It offers you the option of Smart Housekeeping. What it means is that your guests can directly put in their requests through the mobile website. The staff who has been assigned to them will receive a notification. They can immediately set about to perform the task without waiting for instructions from the front desk. Moreover, the backup staff is also assigned to the guests in case the first assigned staff member is busy.

This process ensures that your staff is never inundated with guest requests. The work is distributed uniformly. Moreover, the PMS makes it much easier to create a load balancing charter. In most hotels with fixed check-in and check-out schedules, the work becomes concentrated in a 2-hour slot before check-in. StayFlexi allows flexible check-in hours, so your staff does not have to rush to complete tasks all at once.

Hotel Booking Software

As a hotelier, almost 50% of your investment will be spent on paying your employees. Some of the most responsible and dutiful employees that you need are assigned the task of maintaining the inventory.

Inventory management is not an easy task. The room reservations need to be constantly updated in real-time. Even an hour delay can cause overbooking. And this becomes especially difficult because bookings come through various channels.

Hotel booking software is a tool that directly assigns guests their rooms when they are making the reservation. And the software also automatically updates the inventory as soon as the booking happens. You can find out exactly how this system works in this article.

This not only increases guest satisfaction but also saves you money. You no longer have to hire a receptionist or concierge who is supposed to work 24×7. You don’t need anyone to man the front desk at midnight hours either. With the digital key and the contactless check-in procedure, the guests can let themselves into the room.

The staff no longer has to worry about this painstaking procedure of checking documents. They can wholly focus on hospitality.

Cut Down On Labour Costs

I’ve informed you about two ways in which you can reduce your labor cost without decreasing your employees’ salaries. But that’s not all.

Having a Property Management System allows you to automate tasks that previously needed human labor. For example, you will no longer require an app designer to specifically design a mobile app for your hotel. Neither will you need an IT professional to handle your hotel software. And yes, you can do away with your market analysts and researchers as well.

You won’t need anyone to perform these functions for you because a PMS will take care of all this. No, a PMS is not just a hotel booking software. It is a cloud-based software that will not only store all your data without requiring any updates. It will also use this data to create detailed analytics reports. A PMS like Stayflexi doesn’t just give you fixed reports either. The same numbers can be interpreted in multiple ways. Therefore, Stayflexi has the feature of multi-dimensional reporting where you can view your numbers from whichever perspective you want.

And not just this either, Stayflexi provides you with a mobile-optimized website and also a Stayflexi Orchestra mobile app. This allows your guests to perform almost all actions through their phone itself. You don’t need anyone coordinating all the functions anymore.

Focus on Food and Travel Desk

Hotels make a lot of money from their associated business ventures. In fact, if you think about it, multiple eCommerce stores are run from within a hotel.

The hotel bar and restaurant is of course the first Point of Sale (POS) shop that you can spot. The travel desk is also another important POS. This is where guests are provided cars and tour guides that will take them sightseeing. Some hotels even have mini-stores or spas on their premises.

There is a reason why you should focus on these POS stores. They not only get you a lot of extra money. They also provide you valuable information on how to market your hotel.

Take Disney World for example. Yes, people go there for the rides, sure. But they also flock to Disney World for the goodies and the Disney-special meals and snacks. And obviously, not all hotels of Disney World can boast of the same attractions. Each one highlights its own POS shops or restaurants.

Managing these POS shops becomes extremely easy with a PMS like StayFlexi. You can display your restaurant’s menu on the app so that people can order from their rooms. They can also book spa appointments or sight-seeing slots from their mobile itself.

Stayflexi also tells you exactly which items are selling the most so that you can focus on them in the future.

Reduce Cancellations

This one is a no-brainer. Of course, you want to reduce cancellations. But how are you supposed to go about doing that?

Most hotels that take post-paid bookings, run the risk of having ample cancellations. Websites like take bookings without stating any consequences in case of further cancellations. This is why hoteliers end up suffering from almost 50% of their cancellations.

StayFlexi has an incredible feature called Flex Collect. This basically transforms your post-paid booking into a prepaid booking. The guest is informed that their booking will not be finalized till they pay for the room. Along with this, a payment link is provided. This not only saves you money but also dissuades the guest from abruptly canceling.

You should, however, keep the policy of refunding money if a guest cancels before a certain period of time. For most hotels, this period is 24 hours. But you can extend this to 48-72 hours, or even a week, based on your demand. After all, the aim is to not lose out on money.

People should be encouraged to make their cancellations early if they have to cancel at all. In this way, you can take further bookings at a higher price because of the increased demand for the rooms.

Strategize Overbooking

Overbooking is bad, right? That’s the one thing you’re supposed to avoid.

Yes, but not always. Sometimes, overbooking can prevent you from running at a loss.

There are some events where you can be almost 100% sure that there are going to be ample cancellations. This mostly happens when businesses organize conferences, for example. The average rate of cancellations in such an event is as high as 10%.

So, you should indeed overbook in such times to avoid letting rooms go underutilized. However, you need to be extremely certain of the fact that people are going to cancel. Otherwise, you’ll just have to hand over customers to your competitors at your own expense!

The trick to strategize overbooking is to look at the forecasts provided by your PMS. The PMS has data on the neighboring hotels and general trends. If you must take a risky decision, make sure you have data to back that up.

Personalize Hospitality

Nothing impresses a guest more than when they feel like their needs are being catered to specifically.

Previously, you could personalize according to your guest’s taste as long as they made direct requests after checking in. But not all guests are quite that forward or want to wait that long.

With a PMS, you can start gathering the data even before the guest has checked in. A simple questionnaire through the website can work wonders. This will inform you exactly what a guest expects.

You cannot take the same approach with every guest. Some want a more involved care-taking attitude whereas some prefer to be left alone in their own privacy. You must be aware of these details before the guest has checked in. With a contactless check-in process, this becomes super easy. You can have everything ready by the time the guest arrives, be it a special meal or flowers.

This personalized approach also helps you. You don’t need to go overboard with every guest because they don’t expect it. By fine-tuning your approach to your guests’ demands, you can end up saving money.

Use the Correct Marketing Techniques

Targeted marketing is the key. This ensures you get the maximum returns on your marketing budget. And targeted marketing is something that is actually pretty easy to do in hotels.

What you need to do is know which groups of people are most likely to visit during which season.

For inspiration, look no further than how airlines practice targeted marketing. They know that they cannot advertise to businessmen through the same channels or ads that they use for families. Their approach not only varies with the group that they are targeting but also with the season.

Getting this demographic data is actually pretty easy when you have a cloud-based PMS. A cloud-based PMS after all stores every bit of data including the ages of your guests and their reason for visiting.

Not just this. Remember the first point regarding dynamic pricing? You should use this demographic data to practice dynamic pricing as well. This means offering special discounts to specific groups that are less likely to visit during a particular season. For example, you can offer discounts to families during off-seasons. Or offer single rooms on sale during peak season.

Rarely do two people on an airplane pay the same price for their tickets. You should follow the same principle for the pricing of your hotel rooms.

Invest in a Property Management System

You must have guessed this one already. Everything I have said before comes down to “get yourself a PMS.”

Don’t spend thousands on an analytics specialist, an IT professional, and a dozen people to manage your inventory. Get one Property Management System. This software performs the function of a dozen people and a dozen apps.

Its automation take care of everything from the beginning to the end. This includes inventory management, providing digital keys, cashless check-in, smart housekeeping, contactless payments and so much more. And of course, it also stores every bit of your data and analyses it for you.

This is a single platform that solves all of your problems, reduces labor costs, and boosts your revenue. The entire point of having a PMS is fine-tuning your hotel revenue management.

In Conclusion

There’s a saying: You must spend money to make money.

And never has this saying been more true than in the case of the hotel business. Yes, post-2020 all hotels are running at a loss. But that doesn’t mean that you can stop spending or stop paying your employees. What you must do is spend carefully, based on data, and also try to maximize your profits.

That is exactly what this article guides you to do. Yes, a PMS is going to cost you money. But this is also going to completely alter how you run your business. In the long term, you’ll see how indispensable hotel automation is for saving money on expenses.

Hopefully, you have a firm grasp of the concept of hotel revenue management by now. Want to know more about how PMS helps you spend less and earn more? Leave a comment below!

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