Total Revenue Management for Hotel Profitability

Total Revenue Management: A More Profitable Hotel Strategy

Albert BarraAugust 13, 2018 · 2 min read

THE IDEA

Optimising distribution channels and revenue management is a key challenge for hotels. As OTAs, metasearch engines and online wholesalers reshape the market, hotels need a structured approach to pricing, rate parity, distribution and performance tracking. Total Revenue Management applies the Deming Cycle—from data analysis and forecasting to strategy execution, monitoring and adjustment.

The major challenge facing the Spanish hotel industry is distinguishing between the optimal management of the distribution channel and the comprehensive management of its Revenue Management strategy. By this, I do not mean that the hotel industry has been doing things wrong; until now, the vast majority of hotels have performed very well by leaving responsibility for dynamic pricing and strategic management in the hands of the wholesale intermediary, particularly in resort hotels. Since the arrival of online intermediaries in the market, things have changed, and much faster than some had anticipated. Not to mention metasearch engines, aggregators without direct contracting, and online tour operators that resell their Room-Only product without considering whether rate parity should or should not be maintained. There are major differences of opinion and policies to be applied on this point, depending on the property and its segmentation. Some hotel chains in Spain are committed to full parity, while others offer better rates on their corporate website. Others give preference to intermediaries; in short, there is no single criterion to apply. With the arrival of tools such as Google Hotel Finder, matters become even more complex, which is why I believe a debate should be opened around what is best for hotel profitability. In my opinion, there are so many variables, including financial ones when discussing hotels with guarantees, that reaching a single criterion becomes highly complex.

For me, the important thing is to have a clear understanding of the Revenue Management process, which is based on the Deming Cycle: Plan, Do, Check & Act.

Step 1: Data Mining
Step 2: Forecasting
Step 3: Analysis of the strategy to be implemented
Step 4: Develop that strategy in terms of pricing, rate fences, cancellation policies, product types and other possible combinations.
Step 5: Distribute the changes across both B2C & B2C channels, preferably automatically, proactively and swiftly.
Step 6: Track the results of those variations
Step 7: Correct or maintain the strategy

I hope this brief introduction to what I consider the cornerstone of Total Revenue Management will be useful to you

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