Hotel Marketing Coach

Neil L. Salerno, CHME, CHA

Hotel Revenue Management

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The Benefits of Revenue Management

Many hoteliers concentrate only on increasing occupancy; increasing occupancy by sacrificing average rates just doesn’t make sense; it doesn’t work. Only in rare cases will reduced rates generate enough incremental occupancy to compensate for the rate reduction. It most often results in slightly increased occupancy; only at lower rates and much lower profit.

I know there are some people out there who still believe that lower rates produce increased demand; the fact it that it doesn’t. Revenue management simply takes advantage of increased demand periods. In order to do this, one must be able to recognize those opportunities.

Let’s be practical; the prospect of hiring an experienced revenue manager is way out of financial reach for most hotels. If this is your situation, it behooves you to learn and apply a few simple techniques to improve your revenue yield.   

If your hotel has the size and revenue stream to afford a talented revenue manager, then HMC may not be of much interest to you. If, however, you choose your revenue manager by looking in the mirror and picking the first one you see, you may want to read-on.

Properly Positioned Rates

Are your rates properly positioned to compete in your marketplace? How were your rates developed in the first place? Rates should never be developed in a vacuum; knowledge of your competition is critical to developing your rates. Start with a comprehensive study of the competition.

Correct rates are determined by what people will pay, yet create a good value to the buyer. Value is a relative term which includes your hotel’s location, facilities, and its competitive environment. Ignoring your competition doesn’t make them go away.

The best study for this purpose is called a S.W.O.T. analysis; Strengths, weaknesses, Opportunities, and Threats. This study compares your hotel with your selected competition hotels. It should not simply include bricks and mortar, but also general manager strengths and weaknesses, sales staff, franchise factors, etc.

The Revenue Management Process

Revenue management is a process of anticipating hotel occupancy and market demand and to determine how it will affect your hotel. Of course, this process begins with gathering data about your market’s business flow; your hotel’s occupancy demand and rate history; and your hotel’s current reservations booking pace.

Don’t those hoteliers who have no clue what’s going on around them and are therefore, relegated to reacting to market changes instead of being proactive to potential demand increases. This hotelier is the one that I hear from wanting to do something about next week’s poor occupancy or worse, missed demand rate increase opportunities.

HMC presents revenue management solutions for small to medium sized hotels. We will be happy to work with you to drive increased RevPar (revenue per available room) and increased profit for your hotel.

Let's discuss your situation. Call or email today.

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