business intelligence in hospitality hotel common mistakes Hotel Revenue Management

5 grave mistakes that sabotage your hotel revenue management efforts

Prabhash Bhatnagar
Prabhash Bhatnagar

common mistakes in hotel revenue management

Implementing the best procedures and practices of revenue management at a hotel to increase overall revenue is not an easy task. Especially, when the market is as fiercely competitive as it is today. Smart hotel revenue management is all about how efficiently you locate new revenue opportunities, optimize inventory/rate distribution and how well you analyze competitor pricing strategy, plus local market demand. Moreover, it also depends on the extent to which you understand the importance of hotel business intelligence, on decisions pertaining to revenue management. However, even the smallest of miscalculations can backfire and sabotage all your hard labor towards maximizing revenue at your hotel.

Here are top 5 mistakes you must avoid –

1. No strong inventory distribution plan

Not having a strong and well-structured inventory distribution plan across OTAs, GDSs, hotel website, etc can result in inefficient revenue management strategy. Inefficient inventory management leads to issues like overbooking, double booking, under booking, etc. These issues lead to other problems like guest dissatisfaction, loss of revenue and business opportunities. Additionally, not monitoring sales channels’ performance is also not ideal when we talk about hotel revenue management.

You must know which sales channels are working for you, in terms of giving you more revenue. You must understand this clearly – it is mandatory that you have a right strategy in place to drive more direct booking via your hotel website, while striking the right balance with your OTA partners. You also cannot ignore the large presence of offline travel agents and must work with the leading GDSs.

In short, it is a must to have a strong inventory distribution plan, both online and offline, in order to increase your RevPAR.

2. Ignoring guest service, their feedback & online reputation

You really cannot ignore the importance of guest service, when you aim to improve your hotel’s revenue. You simply cannot go wrong here. Why? Here is the explanation – if you can increase your reputation score just by 1%, you will be in a position to increase your hotel’s ADR by almost 7%. Moreover, increasing your reputation score will also help you to increase your occupancy by 1.4%. Now, this is what you want to achieve, right?

Best-in-class guest services increase their (guests’) happiness; they become your loyal customer and they give you repeat business. They also write positive feedback about your property on various review sites and on social media platforms. This helps you improve your online reputation and rating. And with an enhanced online reputation/rating, you will be certainly in a position to increase your room price.

3. Making assumptions, focus on wrong metrics

On what basis can you come up with an occupancy forecast and room pricing, if you are not in a position to analyze local market demand? How would you beat the competition if you don’t track their pricing? To do all these with ease, you must understand the importance of business intelligence in revenue management.

Key metrics on such aspects will surely help you to analyze and increase ADR while improving the occupancy. As you know that higher ADR is the key to your hotel’s profitability, too much of focus on ARR or occupancy might not help you in the long run.

4. Not adopting occupancy-based dynamic pricing

Hoteliers’ failure to change room rates is another major mistake they commit. While having a static rate will weaken your hotel position, occupancy based dynamic pricing can help you to reach your full revenue potential. Set pre-defined rates for different occupancy levels. For instance, a offer a 10% lower rate when occupancy is at 70% and roll out a discount of 20% when occupancy goes below 50%. This helps you generate more demand during off seasons, and earn more revenue when demand is on higher side.

5. Not adopting a smart cloud-based PMS

This is the most serious mistake that hoteliers must avoid in today’s highly competitive business environment. With the absence of a smart cloud-based PMS, you cannot –

  1. Have a strong inventory distribution plan
  2. Manage guest reviews and improve reputation score/rating
  3. Have KPIs at your disposal to take data-driven decisions
  4. Apply occupancy-based dynamic pricing

Additionally, a cloud PMS comes integrated with a revenue management solution. Without this, you cannot create relational rates and implement multiple rates & types support in a single stay.

In short, with the help of a revenue management solution, you can optimize GOPPAR (Gross Operating Profit) and NRevPAR (Net Revenue per Available Room) at your hotel while offering competitive yet attractive rates to your guests.

common mistakes in hotel revenue management