Six Reasons Why Revenue Management Technology is Important to Small Independent Hotels

In my selling adventures at IDeaS, I often encounter smaller independent hotels with leadership teams believing ‘having fewer guest rooms’ means their property ‘doesn’t need a revenue management system’ (RMS).

Similar to larger hotels, smaller ones are constantly generating data.  Especially if the property has a restaurant, spa, bar, or other ancillary sources of revenue.  Without automation, it is difficult to compile and analyze all this continuous information.

Furthermore, smaller hotels frequently have fewer resources and don’t have a dedicated revenue manager; thus, leaving the revenue strategy up to the general manager, director of sales and marketing, reservations manager, or a revenue management team – all of which already have hectic days filled with other responsibilities.  Often times, this results in over-pricing and under-pricing room rates, which leaves independent hotels at a competitive disadvantage.

The human mind (or even a team of minds) can only process so much information in its decision-making process.  One of the biggest challenges with manual revenue management practices is the inability to collect quality data in a timely manner while being able to use it before it is obsolete.  Hotel data comes from a multitude of sources, changes rapidly, and is critical to making proper pricing decisions.

My view is smaller hotels need an RMS more than larger ones.  Here’s six reasons why I believe a revenue management system is important to small independent hotels:

  1. Every room counts in a smaller hotel
    Pricing rooms incorrectly has a much more noticeable impact on ADR & RevPAR performance. If there is a pricing error at a larger hotel, it is easier to ‘bury’ the rate mistake.  Simply stated, larger properties can hide a multitude of sins in volume.
  2. Smaller independent hotels compete with branded hotels
    Branded hotels use a proprietary revenue management system. If an independent property has branded hotels in its comp set, every single day, those branded hotels have a competitive advantage by having data ‘visibility’ and technology tools the independent hotel likely does not have.
  3. Understanding demand via analytical forecasting
    All hotels, big and small, benefit from recognizing demand present, demand yet to come, and where demand books. Doing so enables setting the right price, for the right guest, at the right time, via the right channel.
  4. Balance of business mix and length of stay
    With fewer rooms, managing booking pace and capturing optimal reservations by accepting the most valuable demand across arrival dates and lengths of stay is even more critical to maximizing revenues. As opposed to focusing on peak nights and accepting lower-rated business when it isn’t needed, which simply trades down revenue.
  5. Appropriate staffing levels
    Being able to effectively deliver a positive guest experience is impacted by proper hotel staffing. Dependable forecasts help hotels ensure appropriate staff levels.
  6. Determining profitable group business
    Generally, in addition to having fewer guest rooms, smaller hotels often have limited meetings and events space. So, accepting groups under the right conditions, at the right price, over the best set of dates, while understanding transient displacement, is important to driving additional profitability and contributing to increasing occupancy.

Regardless of hotel size, revenue management principles apply for all hotels.  But for smaller-sized properties, there’s less margin for error due to having fewer rooms.

By utilizing an RMS, smaller properties level the playing field of competing with larger ones with automated revenue management tools.  An RMS helps independent hoteliers make fact-based, data driven decisions on what one knows will happen versus making decisions on what one thinks or feels might happen.  Such knowledge only comes from incorporating the art and science of revenue management automation – with hoteliers providing the art and the RMS bringing the science.

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