Hotel Revenue Management System: How It Can Boost Your Business Profitability?

Is your hotel’s revenue stagnating despite your best efforts? 

Are you feeling the pressure of 

• Increasing costs

• Rising Competition

• Unpredictable market targets, and 

• Fluctuating demands 

We know how tough and stressful it can be to manage these challenges.

Thus, to help your hard work translate into a profit boost, our travel app development company experts leverage a hotel revenue management system. 

We’ll assist you in making strategic financial decisions and easily optimize your occupancy rates. 

Dig into the blog to see how. 

What is a Hotel Revenue Management System?

A hotel revenue management system is a software solution that helps hotels manage their revenue. The digital tool uses data-driven insights and advanced analytics to analyze data, such as:

• Customer booking patterns,

• Historical data,

• Competition rates,

• Performance data,

• Local market data, and more.

A hospitality revenue management system helps hotels manage their room rates and availability by recommending optimal pricing and strategies. 

Therefore, a hotel revenue management system allows you to dynamically and automatically price your rooms based on real-market movements. 

Do you know? The hotel revenue management system market size is estimated to grow at a CAGR of 8.7% until 2028. 

Why do you think is revenue management in the hotel industry thriving? Why is it becoming so important? Let’s understand.

What is the Importance of Revenue Management in the Hotel Industry? 

Do you think your guests have more hotel options than ever before? Every hotel and every room has just become a “Click Way” option. Indeed, the competition is rising, Isn’t it? 

Manual processes and spreadsheets are fast being replaced by automation and data analysis. These traditional tactics won't let your revenue managers manage 

• Rising costs,

• Empty rooms, 

• Ever-changing e-commerce landscape, 

• Strong competition, and 

• Fluctuating Demands 

Rather, they need to pay constant attention and continuously monitor 

• Property performance 

• Market trends 

• Competitor pricing strategies

• Brand impact, and 

• Consumer behavior 

Plus, you need to adapt strategically to these changes to optimize your return on investment while being open to any new hotel revenue management strategies. 

Now, how does this software help calculate ideal room rates for your hotel, adjust them or provide future projections? Keep reading to understand. 

How does Revenue Management for Hotels Work? 

Revenue management ensures that the correct products or services are sold to customers at the right time and place. 

When it comes to hospitality, hotel revenue management strategies run this concept using real-time data, market analysis, and strategic action to help you sell the “Right Room to the Right Customers at the Right Time in the Right Place.” 

How does this work in practice? Let’s break it down. 

Step 1: Data Collection and Competition Analysis 

The system starts by getting a clear-cut picture of the market landscape. It gathers and analyzes data from different sources, such as

• Property management system

• Online travel agencies

• Central Reservation systems, and more.

The system collects all the information to identify trends and patterns, such as peak booking hours and average length of stay.

But a comprehensive hotel revenue management system doesn’t stop there. It lays the land further by analyzing the competitors. It thoroughly examines the competitions:

• Rates

• Amenities

• Guest reviews and more

How does this help you? You can gauge the strengths and weaknesses of other hotels and identify your unique selling point and market gaps.

Step 2: Demand Forecasting 

Isn't managing unpredictable demands frustrating? Waiting until the last minute to adjust rates and rooms leads to missed opportunities and lost revenue.

The system analyses past data and real-time market conditions beforehand to forecast your hotel's future demands. How does it do that? The system looks at everything, including:

• Historical booking trends

• Current reservation

• Local events

• Broader market patterns

A hotel revenue management strategy will help you

• Anticipate your busy and quiet periods, allowing you to

• Strategically set your prices and promotions,

• Maximize your revenue during peak periods and

• Boost occupancy when things are slow

This way, you can stay one step ahead and make every booking count. 

Step 3: Pricing 

The next step is setting room rates. Once you have a better understanding of your

• Costs,

• Market demand

• Current and desired guests, and

• The competition

You can set your room rates. A static figure never helps, but with the algorithms of the RMS, you can use timely and effective pricing strategies. Based on current demands in real-time, you can ensure that your property gets maximum revenue. 

Step 4: Inventory Management 

A revenue management system also streamlines room distributor inventory both online and offline. This ensures consistent availability of your rooms and rates on every platform. Thus reducing the chances of overbooking and under booking.

Moreover, it also considers how your rooms are allocated across different booking channels, including:

• Websites

• Online travel agents

Traditional travel agents, And everything in between. Why? Because this helps you maximize occupancy and eliminate the problem of unused inventory.

Step 5: Performance Tracking 

Hotels can monitor their performance through detailed reports and dashboards. If you want to easily access, track and adjust your strategies, then you need metrics like 

• RevPAR (Revenue Per Available Room), 

• ADR (Average Daily Rate), and 

• Occupancy rates 

Finally, the RMS provides you with detailed reports and a dashboard. It continuously monitors

• Performance metric,

• Guest feedback

• Market changes

• Occupancy rates and more

It allows you to track and adjust your strategies as and when you need to. It also helps you adjust pricing, promotions, and distribution channels. 

Benefits of Hotel Revenue Management Systems 

Now that you know how not to sit on guesswork for your next strategy or manually crunch numbers, let's talk about the benefits of revenue management solutions.

A perfectly priced room, optimized booking channels and every opportunity to seize revenue are few of many. Here are the top 5 that will take your hotel business to new heights. 

Fewer Errors and More Profit 

The best part about a revenue management system is that you can use it to minimize human errors. How? 

• The system automates manual and mundane tasks, such as rate and inventory allocations. 

• It also reduces the chances of costly errors, especially for small hotels. 

Moreover, with innovative AI development solutions, you can reduce errors and enhance your overall profitability. 

Increased Revenue 

Wouldn't it be amazing if you get an instant all-in-one-overview of your competitor’s doings? With a hospitality revenue management system, you can do that and more. You can 

• Concentrate on your competitor's rate

• Decide on what rates to offer to your customers

• Adjust rates based on demands and booking patterns 

The benefits? You can offer attractive discounts when the season is low and charge premium prices when the demand is high. Thus increasing revenue without the need for constant manual interventions.

Better Time Management 

Isn't it time-consuming when you are manually

• Managing room rates,

• Monitoring trends and

• Adjusting strategies?

The best part about an RMS is that you can use your valuable time to work on other business tasks, such as managing staff and engaging with guests.

Improved time management will boost your efficiency, allow you to access your data instantly and allow you to act on pricing as and when needed. 

Centralized Data Management 

What would be more beneficial than having all your data in one centralized location? No more spreadsheets or juggling multiple platforms with an RMS.

You can access all your data from one single dashboard, from booking information to analyzing market trends. This integrated platform lets you

• Track

• Analyze and

• Act on data insights

Therefore, simplifying your decision-making and enhancing your operational efficiency. 

Data-Driven Decision Making 

Do your guests prefer a total stay price? Would they like to know the room rates when applied to every night? Whether you want to 

• Select the right booking channel

• Plan promotions OR

• Adjust rates

A hospitality revenue management solution will help you make informed, data-driven decisions. So, no more replying to your gut to set prices or allocate inventory.

With an RMS, you can get more consistent outcomes, make smarter strategies, and ultimately boost your profits. 

Want to transform your visionary ideas into powerful mobile applications? Contact our mobile app development company and expert team today. 

A Real-Time Case Study 

Marriott International, one of the largest hotel chains in the world with properties across diverse markets, needed a way to optimize its room pricing and maximize pricing. 

They wanted to do so because of fluctuating market conditions and seasonal changes across different seasons and locations. 

With traditional methods, it becomes difficult for them to adjust rates quickly and capitalize, leading to losses. 

Thus, they implemented a hotel revenue management system. The result? 

• Increase in revenue across properties

• Higher occupancy rates, even in off-peak periods

• Data-driven decision

The adoption of RMS helped Marriott meet customer expectations, boost occupancy and increase their overall revenue. 

The model of increasing profitability and revenue can work even better if you work with the right mobile app development company to develop customized RMS solutions.

5 Ways You Can Use A Hotel Revenue Management System To Boost Revenue?

The first and foremost rule for any hotelier should be to focus on your own business instead of worrying about the competitors.

How well do you know your guests? How do they book or travel? What do they need?

A strong revenue management strategy means you have your customers at the center of your heart. You should squeeze the most value out of each of your guests who enter.

Identify high-value segments, target them with special packages and enhance their experience. So, to drive loyalty, repeat business and book higher profits, dive into these five strategies. 

Pricing Strategy

No hotel group will have a single pricing strategy that works for all its properties. Each property needs a tailored and customized pricing strategy that works for it. So, how do you craft the right strategy that will work for your hotel? You can ask yourself the following questions to craft the right one.

• What tactics will attract customers to specific properties?

• Which strategy will best complement the property profile?

• How will the tactics that you use will impact your connected channels and distribution partners?

Moreover, you can also include strategies, such as:

• Pricing flexibility

• Adjusting rates for different markets and seasons

• Offering discounts

So, the key to a pricing strategy is forecasting demands, staying adaptable and leveraging the right mix of tactics. 

Market Segmentation

Market segmentation is crucial for hotel revenue management, enabling tailored strategies for different guest types. For instance, your approach for young adventurers will differ from that for business professionals.

Hotels can segment by reasons for travel—like family holidays, business, or events—but many now use “blended segmentation,” which combines travel reasons with booking methods (e.g., Expedia users).

Further segmentation factors include length of stay, lead time, and cancellation rates. Understanding these helps target profitable segments and minimize risks. 

For example:

• Loyalty members: Offer discounts for future stays.

• Mobile bookings: Use app-exclusive deals.

• Corporate: Negotiate rates for regular clients.

• OTAs: Highlight special packages.

Another tactic for increasing revenue is segmenting your market. In the hotel industry, market segmentation lets you create customized strategies for every guest.

This strategy can help you take a balanced approach to managing a diverse set of clients, allowing you to increase revenue by focusing on key segments.

Take, for example, you will approach your young adventurer's guests differently than the ones you will approach business professionals.

You can segment your market based on reasons for people to travel, such as

• Family holiday

• Business

• Event

Further, segmentation that can be effective for you includes

• Length of stay

• Cancellation rates

• Days of the week

• How long before the arrival do people book

• No show ration, and more

Once you have a clear understanding of your market segment, you can target segments that will help you boost your profits and minimize your risks. For instance:

• You can offer discounts to loyal customers for future stays

• Offer exciting and mobile-exclusive deals for mobile users

• Advertise special event packages and more

In such scenarios, bespoke mobile application management solutions can further help you cater to different client segments in their best interests. 

Forecasting 

If you are looking for budgeting, forecasting is vital. Accurate and effective forecasting is not just about rate setting. It requires a strong foundation on solid historical data so that you can plan and adjust your strategies well in advance.

💡 Pro Tip: If you are aware of a specific period of time that is vulnerable for your hotel, draft forecasts a year ahead.

What are the key elements of a forecast?

• Occupancy

• Revenue

• Room rates

• Spend per room

• Reservation

• Market trend

With accurate forecasts, you can stay ahead, prepare for, and optimize your profits for the entire year. 

Demand and Budgeting 

Before you start your budgeting, it is a good idea to create a calendar. You start by taking into account the factors that impacted your business last year and also the upcoming trends.

Most hoteliers forecast daily for the next 30 days, while some do it weekly for the next 90 days.

You can start by marking the following in your calendar

• RevPAR from last year

• Past and upcoming events

• Demand levels

• Holidays

• Special occasions

• School holidays

These markings will allow you to make informed pricing strategies based on solid data. Now, how do you decide your ideal budget? By demand. Start by asking yourself these questions:

• What rates and occupancy can you expect daily?

• Is your demand constrained or unconstrained?

Understanding the demands will help you refine strategies and maximize your revenue. 

Revenue Analysis 

Hotels often compare their performance against their competitors to assess their performance. This method is not the only way to measure performance and should not be considered a definite metric. 

However, it does provide valuable insights into where your hotel stands and how your travels are responding. How should you evaluate your performance?

Benchmark your performance on criteria such as:

• Prices

• Products

• Service level

• Location 

• Distribution channels

Moreover, it is worth noting that a competitor is only your competitor if they are targeting the same market as you. However, it is always a good idea to anticipate the revenue strategies so that you can make your own adjustments.

Conclusion

Truth be told, with the ever-growing competition, never-ending data, and unexpected customer demands, you cannot afford to rely on traditional processes and guesswork. 

It is crucial to adopt an RMS so that you can effectively manage rates, optimize your hotel’s occupancy and achieve a profitable bottom line. 

Want to know more? Contact our experts at Green Apex to accelerate your business growth with innovative solutions.