Hotel Revenue Management: Top Strategies for Success

Ever wonder how independent hotels boost their top line by 30-50%? The secret is smart revenue management. In this guide, we’ll walk you through the 5 steps of creating a solid revenue management strategy. Kristine, our in-house specialist, also shares her top revenue-boosting strategies you can easily try at your property. And finally, it’s time to keep an eye on those hotel performance metrics. Not sure which ones to track? Don’t worry; we’ve got you covered!

What is Hotel Revenue Management?

Revenue management is the process of using data to predict room demand and optimize pricing and distribution to maximise revenue and profits. It involves analysing various data sources, including performance metrics, historical booking patterns, local market conditions, and competitor pricing, to make informed decisions about room rates and availability.

The essence of revenue management lies in its ability to turn perishable hotel inventory into a profitable opportunity. Since unsold rooms represent lost revenue, effective revenue management ensures that every room is sold at the best possible price, helping hotels maintain a competitive edge and maximize profitability.

Starwood Hotels and Resorts, a brand under Marriott International, successfully uses a dynamic pricing strategy—adjusting room rates based on factors like economic conditions, weather, room availability, and booking behaviour. This approach has enabled Starwood to boost revenue by 5% per room.

By leveraging the right data and tools, you can optimise your pricing strategies and enhance your overall revenue performance, ensuring long-term success in a competitive market.

Learn more about the top 9 revenue management software providers

What Are the 5 Steps of a Revenue Management Strategy?

Here are the five key steps for hotel revenue management, along with examples for each step.

1. Collecting and analysing data: A hotel manager reviews last year’s August occupancy rates and RevPAR to identify trends and set targets for the upcoming August.
2. Segmenting the market: A hotel manager categorizes guests into business travellers, leisure tourists, and event attendees to tailor offers and services.
3. Forecasting demand: A hotel manager predicts high demand during a local festival by analysing booking patterns and event schedules.
4. Creating and implementing pricing strategies: A hotel manager increases room rates during peak demand periods, such as holidays, and adjusts prices downward during off-peak times.
5. Tracking performance: A hotel manager monitors daily RevPAR and occupancy rates against set targets to assess the effectiveness of its pricing strategy.

Top 9 Hotel Revenue Management Strategies

By implementing hotel revenue management software and smart strategies, RoomRaccoon’s independent hotel partners experienced an impressive 20% increase in RevPAR from 2022 to 2023! We recently sat down with Kristine, RoomRaccoon’s Customer Training Specialist, to chat about her top 9 tools and strategies for hotel revenue management. Her tips have helped our hotel partners increase revenue and fill more rooms.

1. Create a balanced distribution strategy

Your distribution channels play a key role in determining your property’s reach, visibility, and profitability. Relying solely on a single distribution channel like an OTA can be risky due to high commission fees, loss of direct bookings, reduced control over your brand, and vulnerability to changes in the platform’s policies or market conditions.

An effective distribution plan usually involves 4-5 channels with an even mix of OTA and direct bookings. Make sure to consider integrating the following distribution channels into your revenue management plan:

• Official website with an integrated booking engine
• Online travel agencies (OTAs) – a combination of global, local, and specialised OTAs
• Metasearch engines like Google Hotels and Tripadvisor
• Social media pages like Instagram, Facebook and TikTok
• Bedbanks like Hotelbeds
• GDS or CRS like HyperGuest, Amadeus, Sabre and Galileo
• Travel agencies, tour operators, and corporate companies

2. Implement an upselling and cross-selling strategy

Upselling and cross-selling are easy techniques to increase customer spend, and the best part is your guests will be happy about splurging on extras. In fact, 61% of guests are willing to spend more if they receive a customised experience, according to a recent survey.

So, how can you upsell guests?

1. 1. Bookable Add-Ons: Allow guests to select add-ons during the booking process using an integrated booking engine on your website.
   2. Digital Tools: Utilise platforms like RaccoonUpsell to automatically promote add-ons and room upgrades before guests arrive.
   3. Front Desk Engagement: Train staff to suggest appropriate upsells to guests at the front desk.
   4. Promotional Channels: Keep your social media and website updated with your offerings to ensure guests are aware of available options.
   5. Packaged Rates: Bundle meals, and activities, all for one convenient, discounted price.

3. Optimise room-type pricing

To maximise revenue, it’s essential to adjust room prices based on the demand for different room types during various seasons. This revenue management strategy ensures you’re capturing the full revenue potential of your inventory.

Why? Different types of travellers have varying preferences depending on the season. For example, families are more likely to book 2-bedroom suites during the summer vacation period, whereas business travellers may primarily book single-bed rooms during the winter. By understanding and anticipating these trends, you can adjust the price difference between room types to match demand.

Pro Tip:

As highlighted earlier, RaccoonUpsell is an excellent tool for seamlessly upgrading your guests. Fully integrated, it automatically updates your availability in real-time as guests choose exciting room upgrades before arrival.

4. Monetise alternative spaces

RevPAM (Revenue per Available Meter) is becoming an increasingly important KPI in hotel revenue management, especially for properties that leverage alternative spaces such as meeting rooms, workspaces, parking, dining areas, spas, and outdoor event venues. RevPAM helps you measure and maximise the revenue generated per square meter of these spaces.

For example, consider a hotel conference room that’s 150 square meters. If it hosts three events in a week, generating a total of £3,000, the calculation would be:

RevPAM = £3,000 / 150 = £20 per square meter.

5. Apply dynamic pricing for low-demand, high-demand, and everything in between

Dynamic pricing, also known as time-based pricing, is a powerful and well-known strategy in hotel revenue management. In essence, it ensures that rooms are sold at the right price at the right time.

Today, successful independent hotels use automated pricing software to effectively implement dynamic pricing strategies, as it requires swift responses to real-time changes in room demand.

Discover more about RoomRaccoon’s dynamic pricing rules.

6. Build guest profiles

Understanding your target market and their booking and travel patterns is a key aspect of a dynamic pricing strategy. Without these insights, you risk mispricing your rooms and missing opportunities to maximise revenue.

For instance, if you know that a significant portion of your guests are business travellers who typically book last minute and prefer weekday stays, you can create mid-week packages that include amenities like dedicated workspaces or early check-ins to attract this segment. Or, if you identify a trend where families tend to book well in advance for weekend getaways, you can set long-term high-demand rates, ensuring you capture maximum value from these bookings.

Learn more about the different types of hotel guests.

7. Manage your online reputation

Your property’s online reputation can affect your revenue management efforts. The impact is straightforward: if negative reviews are prominent on your marketing and sales channels—such as OTAs, your Google My Business profile, and social media—it can significantly deter potential guests from booking. Maintaining a positive online reputation is essential, as it directly influences your property’s appeal and, ultimately, your revenue.

Discover RoomRaccoon’s document module, which allows you to set up automated emails, making reputation management a natural part of your workflow.

8. Track your hotel’s CompSet

Your competitors have a direct impact on your revenue—if guests aren’t booking with you, they’re booking with them.

The first step is to track your competitors’ data, such as their occupancy and pricing, to ensure your rates are competitive and you can identify market opportunities. This practice, known as rate shopping, is now more streamlined with tools like the CompSet dashboard.

9. Leverage upfront payments to boost cash flow

With platforms like Airbnb normalising upfront payments, the entire booking landscape has shifted. Guests now expect to pay when they book rather than settling at the end of their stay, and this change is a game-changer for hotels. Securing payments upfront means hotels lock in revenue early, improving cash flow and financial predictability.

Key Hotel Performance Metrics and How to Measure Them

In the infographic below, we break down the 6 key metrics every hotel should track, plus include the formulas to measure your hotel’s performance.

Buyer’s Tip: You can’t improve what you don’t measure. Ensure your revenue management software offers clear, insightful performance reports that are easily generated and shared with your revenue team for better decision-making.

Get started with one powerful integrated platform.

The revenue management steps and tactics above rely on having a strong foundation backed by technology. Today, many independent hoteliers utilise an all-in-one hotel management platform that includes native tools that contribute to a successful revenue management strategy, including:

• Property Management System (PMS): Collect vital guest data for better segmentation and accurate forecasting.
• Revenue Management Software: Optimise pricing in real-time with insights from historical data, competitor analysis, and market trends.
• Channel Manager: Maximise visibility and ensure your rates are consistent across all sales channels.
• Booking Engine: Streamline direct bookings and showcase rates and upsells in one convenient place.
• Digital Marketing Solutions: Boost brand awareness and drive more room sales.
• Guest Engagement Tools: Enhance the guest experience and increase ancillary revenue through upsells and additional services.
• Performance Reporting & Insights: Track and measure the success of your implemented strategies.

We’re excited to meet property operators like you and have a friendly chat about your revenue management goals.

Schedule a personalized demo just for you!