Having a hotel packed with people doesn’t always translate to profits. Revenue is the key to a successful hotel business. Revenue management techniques and strategies are used to increase a hotel’s bottom line.

Hotel revenue management is more important than ever for success and profitability. Increased accessibility to data and tools to analyze it may appear to complicate the industry, but it can also provide your company with a wealth of new business opportunities.


Revenue management in hotels – what is it?


Revenue management aims to predict consumer behavior to sell the product each day at the optimal price. Therefore, to describe hotel revenue management simply, you need to sell the right room to the right client at the right time, at the right price, and use the right distribution channel with the most efficient commission. While revenue management and yield management are sometimes used interchangeably, they are not the same.


Interconnected components of revenue management are:


  • Segmenting customers,
  • Forecasting demand,
  • Managing inventories,
  • Managing yields, and
  • Pricing.


As they all play an important role and significantly affect the financial outcome of a hotel, let us briefly describe each.


Revenue management strategies and elements for hotels


Revenue management isn’t a standalone concept. Rates, policies, distribution, and marketing activities are based on the general strategy that they form.


Segmenting customers


In marketing and pricing, segmenting customers is vital because it allows you to target specific groups of travelers. If you want to sell to business travelers, you need to know what they need, so you can present them with the best offers based on factors like age, gender, marital status, purpose of trip, stay duration, etc.


Forecasting demand


Customer demand never stays the same. Seasons, local events, and macroeconomic conditions can affect this statistic. Analyzing past and present demand, as well as current and future events, is a form of demand forecasting. When you have this information, you can predict when demand will increase or decrease, and how you should price, market, and distribute your product. Revenue management focuses on pricing strategy for hotels, choosing distribution channels, and designing promotions to engage more guests.


Managing yields


A yield management strategy aims at selling the greatest number of rooms according to customer demand at the highest price. Inventory management and demand forecasting are closely related to yield management.




Guests make their choices about hotels based on the price they pay. To maximize your revenue, you need to set optimal pricing for your inventory. To understand your customer and view booking trends, you need to analyze the market carefully. Developing a pricing strategy for hotels will be easier then.


The best way to ensure that you have everything ready for travelers who book early is to analyze demand well in advance and set your rates accordingly.


Approaches and strategies for pricing


Based on customer demand forecasts and the different groups of guests you can target, it’s a good idea to base your pricing strategy on customer demand. There are various methods for setting prices. Below are the most common.


Dynamic pricing


According to market demand, dynamic pricing involves constantly changing room rates in real time. A dynamic pricing strategy is aimed at getting the best price for the property. Supply and demand ratios are used, along with external and internal data, such as weather data, booking patterns, customer profiles, rates, etc.


Open pricing


Different prices can be set for reservations made by different guest segments at different times through different distribution channels, etc. Open pricing involves establishing different rates for different guest segments at different times. Even during low demand periods, you can maintain stable occupancy levels and generate revenue with such flexibility.


Pricing based on length of stay


Setting a minimum stay duration can be effective during peak periods, as well as offering a discount for longer stays (for example, set a promo code for reservations longer than four nights). In addition to improving occupancy, the latter can increase ancillary revenue.


Pricing packages and value-added services


Bundling services at a discount is called offering a package or bundle. Such packages can include additional hotel services (such as airport transfers, meals, spa services, etc.) or you can partner with external providers (such as car rental companies or tour agencies) to offer guests special deals.


All these seem a huge task, right? They are indeed!


Solution for You!


In the context of hotel revenue management, a revenue manager is responsible for multiple reports and data files. Hotel revenue management software can solve certain issues. Pricepoint is an example of a fully-automated revenue management system. The system is capable of analyzing property performance 24/7 and resending the optimal prices to OTAs, such as Booking.com and AirBnB. By doing so, net revenues can increase as well as occupancy. 


Sounds amazing? Contact us for more details. Sign up for the demo here.

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