Why rate management is not revenue strategy


“We shape our tools and then our tools shape us.”- Marshall McLuhan

  • Hotel prices are a key influencer over both guest purchasing behaviors and hotel profitability
  • Rate management can eat up hours every day and can often translate into a missed opportunity
  • The utilization of highly-analytical revenue technology enables the revenue management team to break out of its silo

The practice of revenue management encompasses several activities that revenue managers can use to help steer their hotel’s profitability and performance. These responsibilities are vast and varied—they can range from refining and deploying hotel rates, to weekly forecasting, to surviving a seemingly endless budget season, and more.

Hotel rates—defining them, arguing over them, approving them, deploying them, changing them—has maintained a top priority task for revenue managers, analysts and corporate teams alike. And as hotel prices are a key influencer over both guest purchasing behaviors and hotel profitability, it’s not hard to understand why this aspect of revenue management gets such a deserving amount of attention.

However, there is a distinct difference between “rate management” and “revenue strategy,” although for some hotel teams, the line between the two may have blurred over the years. As two very different, yet fundamental tasks of building a revenue strategy, are revenue managers still finding themselves spending too much time on one of these tasks—and not enough time on the other?

Rate management is the act of distributing rates and length-of-stay controls, in addition to ensuring there is appropriate rate parity across all selling and distribution channels. Depending on the tools available, this activity alone can eat up hours every day and due to its arduous nature, it may not even make a dent on changes needed at the far end of a booking window. This can often translate into a missed opportunity and limited efficiency for a hotel.

Revenue strategy, on the other hand, is the act of determining, executing and analyzing the desired rate structure and inventory controls for a hotel property, or portfolio of properties. This umbrella includes different strategic considerations, such as inventory strategy, room upgrade paths, online sentiments like guest reviews and reputation scores, and insightful market intelligence and guest behaviors. Based on the tools a revenue manager is using, they could be making decisions that are informed by all elements—or just a few of them.

Both activities, rate management and revenue strategy, are critical to an effective revenue management process; however, without the right tools in place, it can be difficult to strike the ideal—and most profitable—balance between them.  This is precisely where cutting-edge revenue technology can help hotels automate the more tedious components of management and free-up time that revenue managers can instead use on more value-added strategic initiatives.

With the right machine-learning platform, revenue managers are enabled to progress further in their revenue management journey by automating processes and liberating capacities previously held hostage by manual practices and rate distribution. They can move forward in their journey to higher profitability with more informed and strategic decision-making abilities—guided by the insights gleaned from big data, analytics and market intelligence.

The utilization of highly-analytical revenue technology also enables the revenue management team to break out of its silo and collaborate closely with departments across the entire hotel organization as insights help enable efficiencies for many different stakeholders. This unified front helps every area of the business align toward a common mission and ultimately keeps hotel profitability and long-term objectives front of mind.

Interested in learning more about where your hotel’s revenue journey can take you? Click here.

IDeaS Revenue Solutions

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