Cost optimization and profitability: Cost-optimization has always been a central notion in revenue management. That being said, the pandemic brought renewed attention to the topic. Today, more than ever, proper cost control is crucial to navigate these difficult waters and prepare for the "new normal." Whether we like it or not, every single decision revenue managers take on a daily basis, has an impact on the bottom line, meaning that revenue management is not only about optimizing the revenue streams, but also about increasing profitability. Favoring the distribution channels with the highest profit has become imperative in our industry. But how can hotels calculate the cost-per-acquisition of each channel? What should be taken into consideration? And how can this analysis influence one's distribution decisions?
With roles changing from Revenue Management to Revenue Strategy, profitability has been at the forefront of most revenue decisions and has recently become more critical. The cost can assume various elements such as intermediary costs, commission costs, reservations, sales and marketing and personnel costs. What is important is for businesses to develop individual channel/vendor based strategies that aim to optimize customer segments. Profitability led channel strategy can view acquisition costs individually for each customer segment group, which leads to profitable negotiations.
A data-led and curated distribution approach will help to optimize demand per channel and also help to manage costs