Hotel Revenue Management
Is occupancy dead? The new secret to optimising your hotel’s revenue
When you’re trying to optimise your hotel’s revenue there are multiple different metrics to consider. Occupancy used to be the key factor that hotels considered but if you’re focussing solely on driving up your occupancy rates, your revenue could actually be harmed. Balancing different information to achieve maximum profit and improve your margins is no small task but it is possible.
Why isn’t occupancy the metric you should be focussing on?
There’s no denying that hotel revenue and occupation levels are linked. It goes without saying that the more people that are staying at the hotel the larger the opportunity to increase your profits. But if increased occupancy comes at the price of heavily discounting your usual room rates, your incomings can actually be less. As a result, striving for maximum occupancy at all times isn’t the way to improve your revenue.
It’s also important to note that the more rooms you fill up, the greater outgoings you’re going to experience. For example, the additional rooms will add to the amount of time that hospitality staff will need to spend turning rooms around. The more guests you have staying at your hotel the more wear and tear that your furnishings will endure too, so you’ll need to replace them sooner. With this in mind, it’s vital to weigh up the cost you’re advertising the room at to drive up occupancy against the amount it costs you.
Which metrics to use to boost hotel revenue
With occupancy not acting as a reliable method to boost hotel revenue, what other metrics should you be looking at to deliver maximum profit? In order to shift from a high-volume booking strategy to one that focuses on profit, there are numerous metrics to factor in, including:
• Average daily rate • Demand • Pace • Cost per occupied room • The potential to upsell
By balancing key information and using it to inform your hotel reservation system software you can devise a strategy that allows you to build revenue over occupation.
Should different hotels take different strategies?
There are core metrics that hotels should consider but your type of hotel and its target market, will also determine where you should be focusing your efforts to improve your revenue streams. For example, all-inclusive hotels can be seriously harmed if in their quest to improve occupancy they slash their margins, given how many costly extras guests can benefit from. In contrast, for budget hotels, occupancy and filling as many rooms as possible is vital for maintaining profits.
The secret to improving hotel revenue is to understand how your occupancy and costs balance out and only then determine whether or not you should focus on occupancy or other factors to boost your revenue. With the right hotel reservation system software in place, your real-time pricing can be automated to reflect your baseline costs in light of the current bookings and how to improve them.
Using technology based analysis to inform choices can help your create a reliable, long-term strategy that’s been designed with your goals and success in mind.