Revenue Management Strategies for hotels

If you’re starting a hotel business for yourself, then you need a hotel revenue management system. It will help you get a better understanding of what your hotel needs are, how to sell and upsell the right goods and services to your guests, and how to manage bookings, income, and expenses of your hotel. A revenue management system can help with the same. 

What is revenue management?

Before you come up with strategies for your hotel’s revenue management, you need to understand what revenue management is in the first place. You can define revenue management as a system or series of strategies that you can implement at your hotel or hotel business so that you can avail the highest cost efficiency with every room at your venture so that you can maximise your profit.

Revenue management uses data analytics and performance analytics to gather important information about how the business operates, what revenues and pricing strategies work best, and who are the most viable consumers for your business. The analytics help you as a business owner understand your consumer’s behaviour better, which is key to coming up with a revenue management strategy.

Your hotel pricing can change based on the demand and availability of rooms, the footfall of tourists and visitors to your city, and many other factors that are considered in the data analytics of a strong hotel revenue management strategy. What started as dynamic pricing solutions for airlines based on consumer demand has now grown into an entire industry that is worth more than 14 billion USD as of 2019. So clearly, if you’re asking yourself, “What is revenue management in hotels and do I really need it?”, you’re starting out at the right place. The answer is yes, you need revenue management strategies at your hotel or hotel to make the most profit out of your business venture. 

There are key aspects that make a successful revenue management strategy, which is listed and explained in the section below.

Key elements involved in revenue management

Pricing is just one component of revenue management, even though it might seem like revenue management strategies are formulated just for them. But there are other key elements involved in revenue management that aid the pricing strategy that hotels maintain. These elements, including pricing, are:

Demand forecasting

Demand forecasting is a thorough analysis of consumer demand to predict their behaviours. In a hotel management strategy, consumer demand can be influenced by multiple things such as the time of the year, airline pricing, events taking place in the area, and other key factors that take place on a macro scale. 

Yield management

Revenue management is focused on the entire business revenue, whereas yield management is only focused on maximising profit with the help of the pricing structure. It has many components to it such as:

Customer segmentation

This is the division of the guests based on multiple factors to understand their behaviour and spending patterns. Customer segmentation can be based on multiple factors such as the purpose of the trip of the guests, age, sex, marital status of the guests, the duration of their stay, the booking channels they’ve used, and how often the traveller or type of traveller is bound to visit. These factors help the revenue management strategy by helping marketing professionals create user personas for their customers which can be used to create different marketing and revenue strategies for them. 

For example, a long-term guest might appreciate discounts on a longer stay, a group of students might appreciate cheaper bookings if they are large in size, married couples might want an entire room to themselves instead of a dormitory bed in the hotel, and so on. Understanding consumers is key to developing strong revenue management tactics.

Inventory management

Inventory management is managing the rooms and beds you are selling through multiple channels and platforms. You could have local ads, sales representatives, and digital ads, and you can sign up on different platforms and give your hotel or hotel out as a listing. This way you can manage your inventory, which is your rooms, and see which platforms and methods are working best when you formulate your revenue management strategy for hotel revenue optimization.


The final element of your revenue management action plan is the pricing of your hotel rooms. Combining all the other elements will give you a better idea of formulating a pricing structure as a part of your revenue management tactics for your hotel or hotel throughout the year. You will understand what the optimal rates for your hotel rooms are based on consumer segmentation, demand forecasting and inventory management for better yield management.

Why is revenue management important?

According to a study conducted by data scientist Mr Kevin Hof, he observed that once there was a pricing management system in place, as a part of their revenue management strategies, hotels experienced an increase in revenue by 22% on average. Therefore, clearly, implementing revenue management is an effective solution to combat the problems that come with having fixed inventory.

In a traditional business, you can just increase the number of items in your inventory to increase the number of sales, but buying new hotels or building them is mostly never an option. So, businessmen who are in the hotel and hotel business need to get creative with how they can increase the amount of revenue they generate with their limited and non-changeable inventory. This is why revenue management is important. They can fluctuate their pricing structure to adapt to external circumstances and maximise the profit they can get from their rooms. 

There are a lot of hotel management systems and platforms available in the market that have revenue management as a part of their software. This way you can gain valuable consumer insights from your guests and you can also use it as a way to upsell other amenities and features of your hotel or hotel. 

Revenue management strategies

Your hotel revenue optimization needs a revenue management action plan with certain factors to consider to make it a successful strategy. Here is a brief overview of what the basic revenue management strategies are.

Direct bookings

Direct bookings offer hotels and hotels higher revenue as compared to bookings through third-party sites. So hotels and hotels should focus on building their website and online booking platforms to make them accessible. SEO efforts also need to be made to optimise their website so that the hotel’s website itself drives direct bookings and helps with revenue generation.

Open pricing structure

hotels with an open pricing structure as a part of their revenue management strategy allow business owners to adjust their pricing structure in real-time based on the elements of revenue management discussed above in the article. An open pricing structure can be introduced in the revenue management strategy by using a revenue management system or software that takes in real-time data to come up with the most optimised pricing plan for your guests. They can be adjusted down to an individual guest level as well, depending on the revenue management software that you are using.

Yield management

Yield management, as discussed before, helps with developing the open pricing structure in revenue management. You can optimise the revenue you generate from your hotel inventory based on the results of your yield management analysis and strategy and increase the profit margin of your rooms. 

Channel-based revenue management

There are a lot of third-party channels available to promote your hotel. They are a part of your revenue management strategy and should be addressed individually. The hotel revenue management plan you have in place should have room for each third-party channel and its analysis should be made separately to see the revenue generated from each of them.

Upselling and cross-selling to guests

Once you have a hotel revenue management system or software in your hotel or hotel, you can use it to send out notifications, offers, discounts and more to your guests. It can act as a great tool with which you can upsell your inventory and cross-sell your amenities to your guests. Any additional means that can generate revenue for your hotels such as tours, activities, food and beverages, can be offered to the guests at your hotel.

Length of stay

Some hotels and hotels have a minimum and maximum duration of stay at their place as a part of their revenue management strategy, and they use it to adjust their pricing structure. You can offer discounts to those who stay at the hotel for longer periods to incentivise them to stay and give them additional offers on your other amenities as well. Large groups of people can also avail different offers and discounts based on the duration of their stay as a way of encouraging them to stay at your hotel. There are different revenue management strategies that are based on the length of stay at your hotel that you can implement for your guests, and the ones mentioned above are only a few of them.

Cancellation policy

Your cancellation policy can also be a part of your revenue management strategy. Some hotels offer free cancellations to their guests up until a certain time of their booking as an incentive to promote earlier bookings. Some hotels charge a small fee if the cancellation is done at a certain time before their arrival. Full refunds on the stay, partial refunds, or no refunds are three cancellation policies that you can implement at your hotel based on the booking time period and cancellation period.


Revenue management is an important part of maximising profits at your business venture. hotels, more than anything, need to have hotel revenue management strategies in place for them to be able to get the most out of their investment. The revenue management elements and strategies discussed above are some ways in which you can optimise your profit margin from your investment into your inventory and amenities at your hotel. 

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