Revenue Management in Independent and Small Hotels
As the hospitality industry is growing, not only in size, but also in terms of sophistication and expectations of return on investment (ROI), the scene has shifted from the more traditional dominance of independent privately owned small outlets to larger multinationals and multiple brand affiliations. Where it used to be a matter of small owner-run outlets operating in the same fashion for generations, it is now an industry where investors seek return on their invested capital, and the larger hospitality corporations now count as important and influential companies in most countries
Basically, revenue management means to dynamically adjust your hotel rates based upon demand and occupancy. In other words, it means to sell at a higher price when most of your rooms are sold and the demand is still high. And vice versa. This task involves some monitoring and analysis, a bit of predicting and requires some skills that improve with practice. Revenue management is also referred to as yield management or dynamic pricing, recently even as one to one pricing.
While some big hotel chains or franchise enterprises may have the opportunity to hire a skilled and experienced revenue manager, or even a whole team, many smaller and independent properties need to assign this job to an existing employee. Usually, this is the general or the front office manager, or probably the head of sales where such position is available. The person in question has to quickly develop the skills for the task and start delivering results.
At the same time, there are still hotel managers and owners that do not understand or underestimate the importance of revenue management and how it can affect the business. We live in the era of online sales, OTAs, meta search and increasing last-minute bookings, where the time period between making the reservation and the real stay is constantly shrinking. These factors all result in more dynamic occupancy rates and the emerging necessity to closely monitor the trends and adjust the pricing policy accordingly in order to get the most from each deal. The volume of missed revenue that the absence of revenue management might cause will probably transcend your worst assumptions. The good news is that the task does not need to be so complex and hard to accomplish.
Today, independent hotels have access to more tools boosting revenue than ever! However, a certain amount of know-how is needed to truly leverage revenue opportunities (such as distribution channels, social media, technology) for independent hotels, since they refer to lack of resources and a limited budget to invest in high-end technology as major challenges associated with revenue management.
The range of hotel management structures vary from complete independence with a private chain code to GDS/Internet Technology connectivity with a generic chain code to soft branded representation with CRS technology and a branded chain code to "hard brands" that provide technology and also manage hotel operations.
Independent hotels may combat budget and resources constraints by choosing a "soft brand" that provides technology and resource savings through economies of scale, yet allowing independent management and identity.
Most of China's luxury hotels are owned by foreign companies and managed by famous international hotel chains. They generally adopt identical revenue management systems developed by the chains. Such systems are applied internally and exclusively, sharing information and customer resources among all the members of the chain. In general, they are effectively applied and are highly advanced. Moreover, most of China's state-owned hotels are relatively small and medium sized hotels. Their older management ideas and low-level information systems result in the following barriers against China's hotels implementing revenue management systems.
In the past, revenue management was a practice that only high-end, luxury properties implemented for two major reasons: first, it was hugely cost prohibitive, and second, it required the hotel to hire a revenue manager to execute the processes (or oversee the revenue management system RMS). Only properties with large budgets – both for revenue management and personnel – could actually afford to use revenue management to price their properties, leaving smaller, boutique properties struggling to keep up
But that was yesterday and today, lots of things have changed. Today, revenue management is a practice that all properties should be using to improve their occupancy, ADR and RevPAR – no matter their budget, number of staff, star rating and property status (branded vs. independent).
