Challenges abound for hoteliers in charge of revenue management in the hospitality industry. Hotel revenue management—while essential—can prove extremely difficult for several reasons.
How do you attract new guests and clients while promoting the loyalty of existing customers without negatively impacting your bottom line? How do you increase your profits even as prices remain high and the future remains unknown and uncertain?
The answer includes a little research, creative thinking, having the right tools on hand, and some help from those who understand what you’re facing.
Continue reading to discover the top 11 challenges facing hospitality revenue managers and find out what can be done to avoid to help prospective customers choose your business despite the challenges.
Challenge #1: Difficulty understanding your audience & their intentions
To win repeat business, you must provide a quality experience that meets your client’s needs. And to understand your client’s needs, you need to understand why they’re traveling in the first place.
According to research conducted by Google and Bain, the top factors influencing people to travel include the following:
- 17% of travelers felt motivated to book a trip because they often thought about trips they’d like to go on.
- 16% of travelers wanted to travel to a destination for an extended period.
- 16% wanted to go on vacation.
- 8% wanted to visit family and friends.
- 7% wanted to celebrate a special event.
- 7% wanted to book a trip after receiving a discounted or special offer.
Luckily, there are many ways you can collect and store this information. Understanding your clients’ reasons for traveling could be as simple as asking them the reason for their stay while they check in, or you could ask them during a pre-check-in survey.
Regardless of how you ask, make sure that you do so that you can craft an experience that helps your audience meet their travel needs and book with you again.
Challenge #2: Relying on manual processes that take up too much time
Until recently, revenue management relied solely on manual exports and spreadsheets filled with dense data ready for analysis. Most hotel revenue managers even relied on fax machines to manage wholesale agent allotment adjustments.
Thankfully, times have changed—and for the better too. Digital advancements have altered the hotel revenue management landscape by offering ways to streamline these processes and improve operational efficiency.
One survey detailing the impact of manual tasks showed that 60% of respondents believed they could save 6+ hours per week automating manual tasks, allowing them to spend that time on other tasks with more strategic value.
Overcoming slow, manual processes can be addressed by onboarding automation software. For hotel revenue managers, hospitality revenue management automation software can lead to profit growth, price optimization, and more time available to focus on strategic concerns.
To discover additional ways an RMS can help hospitality organizations increase efficiency, check out Who Benefits Most from a Hospitality Revenue Management System?
Challenge #3: Having data but not knowing what to do with it
Sometimes there isn’t enough data to help you make strategic decisions. Sometimes there’s too much data, making it difficult to determine what’s relevant and what isn’t.
When you want to focus on strategies for maximizing profit, you don’t want to dig through piles of data with no actionable narrative thread.
As a hospitality revenue professional, you can address this challenge using an automated revenue management system (RMS) like G3 RMS from IDeaS. These systems use artificial intelligence to provide insights that help you more effectively price rooms, event spaces, food and beverage, catering, spas, and other revenue streams.
Considering factors like supply and demand, local events, ever-changing trends, and historical records, these RMS assistants take the guesswork out of revenue management (and help you excel in your role).
Challenge #4: Communication gaps between departments
Even when everyone on your team has the same ultimate goal, those goals can be harder to reach without open, consistent communication between departments.
For this reason, any revenue manager who wants to meet and exceed revenue goals should prioritize inter-departmental alignment.
You can start by improving your internal communication structures. There are several different ways to accomplish this:
- Communicate about how you like to communicate. A positive feedback loop needs to start somewhere. Set up a meeting to discuss everyone’s preferences and create agreed-upon guidelines for action and response.
- Choose revenue management tools with features that help. By making it easier to share and export documents, the right tool can make it easier to avoid the pitfalls of miscommunication and unnecessary duplicate work.
- Adopt an easy-to-use internal chat tool. Internal chat tools like Slack or Google Chat will simplify quick-turn communication between departments.
Challenge #5: Strategy that lacks well-defined KPIs
A strategy without well-defined goals is a strategy that isn’t going to lead anywhere. Choosing the right Key Performance Indicators (KPIs) is a challenge all revenue management professionals face.
The following KPIs are a great place to start, no matter what type of hotel you manage:
- Revenue available per available room (RevPAR): This measures property performance versus competitors within the market.
- Average daily rate (ADR): This measures the average rate for rooms sold during a designated time frame.
- Occupancy rate (by day, week, and month): This measures the percentage of occupied rooms at your property for a designated period.
- Average length of stay (ALOS): This measures the overall average number of days booked by an individual.
- NetRevPAR: This accounts for RevPAR minus the cost of the booking (commissions, channel fees, etc.).
- Revenue Per Square foot (or meter): This applies to hotels with event space function space.
You can address this challenge by researching other top industry KPIs and finding a tool that simplifies tracking those KPIs.
An automated RMS, for instance, can help by having KPIs built in for you to choose from based on your unique needs and priorities.
To discover other key metrics, check out The Next-Gen Revenue Management KPIs Hoteliers Should Be Tracking
Challenge #6: Too many responsibilities, too little time
If you’re a revenue management professional in the hospitality industry, there’s one thing you know for sure: you have a lot to do and not enough time to do it.
Imagine how much simpler your job would become if you had a colleague that was an expert on identifying no-show and cancelation patterns and could calculate flexible prices based on target audiences, market behaviors, and forecasted demand.
This challenge can be addressed by using automated revenue management software. An automated RMS provides the insights of that dream colleague while taking on tedious, time-consuming manual tasks so that you can focus on other priorities.
Challenge #7: Struggling with staff retention
Staff retention is a crucial part of revenue management. According to a study by the American Hotel & Lodging Association (AHLA), 97% of the 500 hoteliers surveyed in North America claimed to be experiencing staffing shortages, and CBRE has observed similar trends in Asia Pacific.
This challenge can be addressed by having plans in place for staffing cost management. The right revenue management solution can help develop those plans by determining staff needs based on predicted demand.
An RMS can look at trends to predict upcoming staffing needs and allow you to more effectively manage the support your business needs without costly oversight.
And when it comes to retaining revenue managers, an automated RMS can help them avoid burnout by automating many of the draining, time-consuming tasks associated with traditional revenue management.
Challenge #8: Not having a strategy for handling online reviews
Sometimes things don’t go exactly as you or your guests would like.
This challenge can be addressed by paying attention to and addressing online reviews. Don’t ignore web reviews on sites like Google or Tripadvisor. Interact with your guests online. If there is a problem, a manager from the property should reach out to make things right.
Addressing guest complaints will help increase your online review scores, capture future business, and keep negative reviews from torpedoing your revenue management strategy.
Challenge #9: OTA domination of the global travel market
Online travel agencies (OTAs) are something all hospitality revenue managers need to consider. They’re incredibly popular in the consumer market, but working with them as a hospitality organization can lead to several potential problems:
- Lack of control over marketing spend and messaging
- Pressure to offer steep discounts and decreases in rates
- Zero access to strategy-impacting client data
- Competition for ad placements
- Lack of autonomy and commission disparity
This challenge can be addressed by offering a better direct booking experience. Customers will be more likely to return if it’s faster and easier to book with you directly.
One distinct way to stand out is by making sure you’re offering a mobile-friendly booking experience. Some data suggests that more than a quarter of all reservations will be done via mobile devices by 2024.
Challenge #10: Handling the stress of overbooking
It takes many complex strategies to handle overbooking in a way that keeps customers happy without negatively impacting your hotel’s bottom line.
Overbooking can increase your occupancy rates, but doing it too much can lead to lost revenue from reputation-saving free upgrades. Ideally, you’d never have cancellations or no-shows, making it challenging to manage occupancy rates, but they’re unavoidable.
This challenge can be addressed by paying particular attention to booking trends. It’s also worth noting that overbooking is not limited to overselling the house but can also be done at the room type level to truly maximize overall revenue performance.
Of course, an automated revenue management system can assist hospitality organizations with overbooking. The right RMS will be able to predict trends, adjust rates, and assign upgrades based on existing user and trend data to protect both your organization’s reputation and your revenue – at the room type or house levels.
Challenge #11: Defining customer segments
Segmentation is what allows you to determine the best course of outcome for any type of customer. Market groups for your hotel might include business travelers, large party vacation groups, or something else entirely.
Once you’ve determined your biggest segments, the challenge becomes defining how you’ll adjust your services for each one to inspire ongoing business.
This challenge can be addressed by adopting revenue management software that makes those adjustments for you. The right automation tool can look at how your segments behave and pull out actionable insights for you to act upon. Better retention of your biggest consumer segments almost always leads to more significant bottom-line returns.
Discover the all-in-one solution for hospitality revenue management
As you can see, there are many challenges facing revenue management professionals these days, including non-actionable data, never having enough time, big league competition, and more.
Luckily, there’s a solution out there that can help you face each of these challenges with confidence.
Say “goodbye” to many of your challenges with a revenue management system that helps you increase RevPAR, save time, enhance productivity, and so much more.