Pairing Revenue Management with Limited Service Hotels | IDeaS Blog

Pairing Revenue Management with Limited Service Hotels

The right revenue management practice in a limited service hotel is similar to finding the perfect robust and balanced wine. The flavors of revenue management range from simple to complex and represent different varietals of revenue managers.

Just like a perfectly paired glass of wine complements a nice dinner, the right revenue management practice is the perfect pairing with limited service hotels looking to maximize their profits.

Selecting the best revenue management approach to complement an organization often constricted by cost controls and limited staff may feel daunting at first. Below are four approaches to revenue management that pair well within different limited service hotel environments.

Onsite revenue management practices pair well with limited service hotels that are able to invest in the right technology and educational programs.

The application of revenue management and its technology has made large improvements in recent years. Today’s technology takes care of most of the heavy lifting, distributing decisions into multiple channels at the click of a button.

With the right educational programs and technology in place, hotels with limited headcounts can still conduct basic forecasting and analysis techniques to achieve better inventory and pricing decisions. The onsite approach is appealing because not only can hotel operators control their own price and inventory decisions, but they will achieve better returns than by not doing any revenue management at all.

Cluster revenue management practices pair well with organizations equipped with technology that manages multiple properties by a single revenue manager.

Cluster revenue management can be extremely effective both in terms of cost and revenue optimization potential. An effective revenue manager with the right technology could manage multiple hotels as good as – or better than – a single property revenue manager. As well as lowering payroll costs, this approach could also potentially generate better revenues by aligning pricing and strategies across multiple hotels. Revenue managers can take advantage of observed demand in one hotel to adjust strategies across multiple hotels in the same market.

This pairing includes the consideration of ownership: ownership of the assets and ownership of the revenue manager. With the assets, it is important to think about whether the managed properties are controlled and owned by different entities. Clustering effectively by considering multiple brand standards, channels, processes, tools, etc. needs to be thoroughly vetted.

The ownership of the revenue manager is more difficult to quantify but can also impact the success of this pairing. How does a revenue manager ensure that all properties are treated equally or proportionally? Missed revenue opportunities can present the emergence of these types of discussions on this basis.

Centralized revenue management practices pair well with organizations with a high degree of standardization across their portfolio. These organizations are often owned and operated by the same entity. This approach can also complement hotels with consistent and easily identifiable booking and stay behaviors, which is an optimal environment to manage 20-30 hotels effectively from a remote location.

Limited service budget hotels are in an exceptionally unique position to take advantage of this pairing due to their lack of complications (lack of room types, F&B facilities, meeting facilities, etc.) Technology can accommodate their consistent types of demand patterns with extremely accurate forecasting, pricing and inventory decisions, taking full advantage of demand. This allows revenue managers to focus on long term strategies, monitoring and controlling tactical decisions. Advancements in technology include improved visual analytics tools and reputation scores integrated into pricing decisions, allowing revenue managers to drive performance across a large amount of assets.

The main challenge of this pairing is similar to clustering: Who owns and operates the hotels, and are they willing to relinquish control of their pricing and inventory to a remote central office? This is often why centralized revenue management tends to work best where hotels are owned and operated by the same entity.

Outsourced revenue management practices pair well with hotels that have a high degree of standardization but are not equipped with the most advanced tools, technology or people.

There are many virtual revenue management services available to hotels today, with fees based on daily, weekly or monthly support to address key needs. Virtual revenue management services often use a desktop sharing program to access hotel and market data through a variety of advanced tools, process and technology often otherwise unavailable to the hotel. This approach tends to give more control to the owner/operator as they make decisions on what strategies are implemented, although that does require some level of revenue management knowledge to make the right decisions.

A potential drawback of the outsourced pairing is that one often has to conform to the concepts, standards, tools and processes as defined by the provider. This is not always a good pairing for everyone. However, when it comes to limited service hotels, having slight differences in report displays, as an example, may seem a small price to pay for more optimal pricing and inventory decisions. The approaches and technology applied to managing pricing and inventory do vary across hotel chains and service providers, which can mean different results for the hotel.

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