Revenue Management's Renaissance

Abstract

The era has ended when revenue management can stand alone as a tactical approach to room management. With technological and management support, revenue management must be and is being integrated into all aspects of hotel management marketing and operating strategies. Going beyond its role of managing room inventory, revenue management will consider total revenue contributions, including group business and its ancillary revenues. Because prices are essentially transparent, hotels will need to consider customer price elasticity and not simply match competitors' prices, with a goal of optimizing prices. Beyond that, revenue management can be used to manage all of the hotel's revenue streams, in part by considering the interaction of room sales and food and beverage sales. While revenue per available room (RevPAR) has been a good measure of performance, a revenue generation index, which compares competitors' RevPARs, is even more useful. Even more sophisticated is a revenue opportunity model, which monitors the effectiveness of inventory controls and analyzes the effects of revenue management decisions. Perhaps most promising is a customer-focused approach that tracks customers' purchases and targets promotions based on an understanding of customers' responses to prior offers.