10 Metrics for Improving Your Revenue Management Strategy

10 Metrics for Improving Your Revenue Management Strategy

Historically, revenue management has been associated with numbers and results.

With a better understanding of the market, revenue managers can optimize returns and manually plan based on estimates/forecasts from the commercial department.

There has been a huge jump from what was traditionally done in revenue management to what is currently done in the field. The parameterization of the information provided by the market together with hotel performance are key resources for making better decisions.

The 10 metrics mentioned below are important for improving your Revenue Management strategy. Factors such as determining the most profitable channels, the location of your potential customers and the pricing strategy made by your competitors should be taken into account, along with the following points:

• Chronological growth or decrease of results. It is important for you to have access to metrics for each distribution channel at any time during the year. By comparing historical data and reviewing your commercial results, you will know the direct impact each action executed has had on your hotel´s distribution.

• Analyze demand patterns by channel. Identify booking opportunities on certain channels and the return on investment of bookings from specific traveler profiles.

• Revenue without commissions and commissioners. If you want to know whether the distribution channel you are using is profitable, you will need to calculate the net income of the channel and the amount paid for it. This will give you a clear idea of how much the distribution channel costs your hotel. Collecting this information manually, or better yet, having an RMS that shows you this information instantly will greatly help you regulate room availability according to rentability.

• Real bookings for each channel. If you determine the difference between bookings versus actual stays for each channel and identify cancellations, you will have a clear idea of the results seen with each channel. Thus, you can adjust your hotel´s cancellation policy and determine the value of each reservation by channel, considering the risk of cancellation that it entails.

• Cancellations by channel. It is important for you to have access to data such as the percentage of monthly cancellations and the waiting time involved with booking cancellations. Inventories will vary depending on cancellation rates and the potential risk that a cancellation entails for the hotel.

• Reservations per weekday. This information is important to know to be able to achieve the desired occupation rate of 100 percent. It also gives you the booking curve for the different days of the week. Market segmentation can vary any time during the week, therefore the hotel supply must evolve with and align with the expected demand.

• Average daily rate (ADR). It’s essential to consider the average daily rate for each rate plan and channel. At the same time, it is important to indicate the average amount paid for each occupied room over a certain time period. ADR is one of the most important indicators for hotels, especially when measuring your hotel´s operational performance.

• Average length of stay. The average length of stay per distribution channel ought to be reviewed. Is there a booking pattern for a particular type of guest or do guests book shorter stays depending on the distribution channel?  If a pattern is detected, it could be due to special promotions, so it is worth keeping an eye on this number at your hotel. It’s important to analyze everything that happens with your hotel to avoid low periods during promotions and look for market segments that help balance out demand.

• Identify your guests’ geographic location. By filtering bookings by location, you can identify which channels are stronger in certain geographic markets, helping you target your market better. You can also determine where most of your bookings come from (direct or indirect channels), especially in markets that would otherwise be difficult to enter.

• Rates established in each distribution channel. It’s important not to limit inventory rates simply for the reason of making rooms available in different channels. Otherwise, you will prevent potential bookings from taking place. In addition, it is advisable to promote early booking with pricing deals so that you can increase average profits. By regulating early bookings, you can avoid depending on “last minute” bookings.

These 10 metrics will help you improve your hotel´s revenue management strategy. All the information you need is within your reach, now all that’s left is to make good use of this knowledge and to continue acquiring as much data about your target market. A strong basis in your revenue management strategy will increase your hotel´s profits and achieve a more effective distribution. Now it’s your turn. Go ahead and follow the tips above to improve your revenue management strategy!