Humans have a difficult time reacting in real-time to trends in the market, especially when they also need to manage every aspect of their business
Fremont, CA: A fact of everyday life is revenue management. There are green and red numbers on gas station signs, green and red milk prices in grocery stores, and airfare at airports based on revenue management.
The science behind revenue management involves cleverly analyzing supply and demand as well as the market as a whole to maximize profits. The practice of applying revenue management techniques to the hospitality industry is, however, slow-going at times.
Here are my top five revenue management mistakes that innkeepers, hoteliers, and campground managers make.
1. Flat Rate Pricing
In terms of revenue management, a property's biggest error comes from not implementing any. In this case, the manager lacks any kind of pricing strategy and decides on their rates to suit their discretion rather than following any kind of pricing strategy.
2. Not Making Use Of Supply And Demand
Is there a difference between a plane ticket to Honolulu, Hawaii, on December 25th and a plane ticket to Juneau, Alaska, on the same day? Prices will reflect demand, with Hawaii Christmas flights likely costing double or triple what Alaska flights cost. It is evident from this that demand is especially important when there is a limited amount of product on hand.
3. Pricing Too Aggressively
Many people think "revenue management" is just another way of raising rates, but it's not. The fact that you raise your prices does not mean you have a clear strategy. In the other direction, it could cause your occupancy to plummet so much that even some high-paying guests cannot cover the difference.
4. Trying To Do Everything Manually
Humans have a difficult time reacting in real-time to trends in the market, especially when they also need to manage every aspect of their business. With the help of tools, you can improve your operations without constantly updating your units.
The management of yields is one example of this.
5. Not Using Historical Data And Analytics
For people who got into hospitality for its interpersonal component, this is an industry that thrives on data and analytics. The average daily rate of your property, revenue per available room, and occupancy can be analyzed to see if any patterns emerge over time. The busy season traditionally runs from June through August, but you might find that there's an annual slow patch starting in July.