Saturday , February 24 2018

Increase Room Revenue and Lower Costs

How smaller accommodation operators can leverage key channels and increase revenue…

With available technology heavily impacting the way in which guests research, book and review a property, it’s no surprise that having a strong online presence and savvy pricing to match is an absolute must for accommodation providers of all sizes.

Effective yield or revenue management is a balancing act between achieving the highest average daily rate (ADR) and occupancy percentage, with the overall purpose being to achieve maximum revenue that the current demand opportunity presents.

Across all levels of the accommodation sector, whether a large commercial business or a smaller independent owner operator, the theory of selling the right product, at the right time at the right time at the right price applies perfectly, hence the fundamentals of revenue management including dynamic pricing should be applied.

Demand is forever changing as bookings are created for a property. So too should prices change to fairly reflect the supply of available inventory to the level of demand.  By shifting focus from occupancy to room revenue, accommodation providers can increase profit margins and lower costs.

rol-bell Increase Room Revenue and Lower Costs

Consider this, a property that reaches a higher occupancy or fills before a competitor, will typically sell at a lower rate. They may have filled more rooms, however, based on the same level of demand, that same property could have achieved a higher average rate and the same if not more room revenue.  This can be achieved by watching inventory levels in advance, and increasing the rates for the remaining portion of rooms to achieve the best possible yield. Fewer rooms sold at a higher rate not only means more total revenue, but also means fewer rooms to service. Hence reduced costs can also be achieved.

Larger commercial hotels employ full-time dedicated team members, Revenue Managers, to carry out strategic planning and pricing practices, including navigating and updating online listings and feeding rates that flex and change with demand in order to increase revenue. Smaller operators, whilst not having these same in-house resources, can consider outsourcing to experienced Revenue Managers to positively impact their bottom line, or alternatively they can consider investing time and focus to adopt just a few of fundamentals of effective revenue management, as follows;

1.     Consider booking trends and use historical data to make sound decisions

Understand how your guests book and use predictive analytics to adapt your pricing in order to leverage this knowledge. For example, if you know town will fill at a certain time each year, whether due to a key annual event or simply due to seasonal trends, have confidence with your pricing and set your rates ahead of time.

Simply increasing rates because it’s traditionally a high season, or lowering them because it’s a low season isn’t necessarily going to ensure the potential revenue opportunities are being maximised. Accommodation providers need to look at what’s happening in town, look at forward bookings, think about what traditionally happens at the particular time of year and make a strategic plan.

2.     Invest time to plan ahead and continually monitor your room inventory

As bookings drop into your property, your supply to demand ratio is ever-changing. It’s important to carry out a dynamic pricing strategy that flexes with demand so that your prices are always a fair reflection of what’s happening. This pricing model allows you to leverage demand to increase revenue during peak times. Guests have come to expect they will need to pay a little higher in peak times, just as they would with an airline or larger hotel.   You should always position yourself to plan ahead for softer months by implementing value-add or advance lead-time promotions to attract more bookings ahead of time, this will mean you don’t need to discount last-minute which only causes lost revenue.

3. Leverage your most successful booking channels

As with any marketing efforts, the return on investment should always be tracked.  With this in mind, the days of paying an up-front lump sum for an unpredicted number of bookings in return are all but gone. Accommodation providers now have the ability to list their business online, gain access to an unlimited number of potential guests, and only pay a commission or ‘marketing fee’ based on actual eventuated bookings.  By carefully managing online listings and controlling the pricing, savvy operators have access to piggy-back on the marketing powerhouse that is the online travel agent (OTA).

Rooms Online is in tune with the challenges that many smaller accommodation providers are faced with in the current online world – whether it’s lack of time to spend navigating the online landscape, simply wanting unbiased honest advice with promotions, or needing assistance with a dynamic pricing strategy. Rooms Online will help increase your exposure through your online channels, and grow your profitability by implementing effective dynamic rates management.

rol-logo-300x232 Increase Room Revenue and Lower Costs

Contact the NZ based Rooms Online team for details and a no obligation chat on 0800 676 667 or email

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