A New Approach to Hotel Revenue Management

The age of Online Reviews – a new approach to Hotel Revenue Management

In the first part of the article, we talked about the origins of Hotel Revenue Management while briefly presenting the traditional approach to it.

Today’s markets have fundamentally changed, both when it comes to demand patterns and purchase behavior. This is why most existing Hotel Revenue Management approaches seem to be outdated.
Hotel Revenue Management has become quite a complex field. Consumer demands have become very distinct, and a hotel’s weaknesses, when discovered, are easily shared with the world. Long-lasting satisfaction is much harder to achieve when the market of potential guests is basically unlimited. However, online review portals and review analytic software, such as Customer Alliance, offer new and cheap ways to effectively measure customer satisfaction.

Next to Revenue Management software, effective review management can provide a good opportunity to formulate and eventually achieve business goals. By using professional review analytic solutions, hoteliers can gather feedback that can help them determine appropriate pricing for their entire range of products and services, as well as for different customer groups.

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A case study provided by SAS

The American analysis institute SAS (statistical analysis system) conducted a scenario-based online study, in order to investigate general booking behavior of people searching for accommodation via online channels. The results showed that driving revenue and share in the hospitality industry is no longer just about competing on price. Consumers are clearly turning to user-generated content to inform their purchase decisions, and in particular to reviews. This means that “hoteliers must not only keep an eye on how they are priced relative to the market, but also on how they are positioned in terms of reputation” (McGuire, 2014).

Call to action for hoteliers

If ever a general conclusion can be drawn concerning the complex field of Hotel Revenue Management, it should be a simple one like the customer is always right!

In order for a hotelier to maximize revenue, it is crucial to accurately react to the demands of hotel guests. While this has always been important, today’s Hotel Revenue Management has to be even more dynamic and flexible in terms of price structure than it has been in the past.

Customer Alliance offers a modified version of the BCG-Matrix (a growth-share matrix developed by Boston Consulting Group). This can be can be used as a handy tool for Hotel Revenue Management to anticipate cash flows and to make resource-allocation decisions:

Due to the rise of online travel research and online bookings, user generated content such as reviews and feedback have become a – if not the – major decision factor for customers.

Thus, the correct combination of pricing and online reputation might be the key to driving customers to your property and eventually renovating the traditional concept of Hotel Revenue Management.

You want to go deeper into this topic, find out more with our articles about the ADR and the GOPPAR, other important metrics for hotels.

Learn more about how to effectively measure customer satisfaction with our software-solution.

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Further reading on the subject

  • Carol Verret, Hotel Sales and Revenue Management Book 2.0, 2008 (read excerpt here).
  • Kelly McGuire, Pricing in a social world: Five tips for revenue managers (Part 1 and Part 2)