Revenue Management, the winning formula

We all know that the consequence of good hotel management in economic terms is obtaining the maximum profit possible, but selling more doesn’t always mean earning more or being more profitable.

In hotel establishments specifically, an increase in sales does not imply achieving an optimisation of profits. For this reason, before making any strategic decisions, and if the hotel wants to play in the Champions League, metaphorically speaking, it is necessary to gather all the information available regarding the establishment’s performance to subsequently analyse it and make more favourable decisions.

Following this football metaphor, the same thing happens to a hotel as a football team. Big teams, to ensure victory, must be consistent throughout the season, and to do so they must optimise their resources correctly.

Winning by a landslide or filling the stadium during the month of August is all for nothing if the team ends up exhausted before the start of the next game, or if you don’t take into account external factors like climatology, the number of games played previously, or the skills of the opposing team.

It’s important to establish a long-term strategy and follow it rigorously to achieve the goals set at the beginning of the season and to tackle each game with the most efficient tactic. Otherwise, you’ll end up with a bittersweet or merely symbolic victory, as it’s possible that in the future it will have negative consequences associated with the team’s tiredness, which will affect the club’s results and image.

Hotel revenue management is usually defined as the optimisation of resources by selling the right product to the right client, at the right time, at the right price and through the right channel, bearing in mind that lowering prices isn’t always the way to achieve set objectives, even when many hotels do so, thinking that it’s the winning formula and the way to obtain profits.

Let’s go back to the football and hotel sector analogy for a second. At the end of the day, winning a football match doesn’t come down to the best player on the pitch. On many occasions it’s a question of establishing the most effective tactic to beat your rival. In short, it’s not about filling your establishment by employing your lowest rate.

In this regard, revenue management has become the best tactic in this particular Champions League as, like big clubs have seen, the competition in the market is ever greater and clients are frequently more price aware during both peaks and troughs.

Even still, and before beginning our rate “pre-season” prior to playing in the premier league of price management, hard work is required. First, you must familiarise yourself with a series of terms that will ensure you don’t see a red card when you least expect it.

Firstly, and paradoxically, let’s refer to the assistant manager, RevPAR (revenue per available room). This measures the performance of your team but doesn’t consider how many games you’ve won. For this, you will need GOPPAR, or the manager. In this case, performance is measured by considering the efforts the team has made. In other words, with RevPAR you can calculate the financial performance of the hotel without knowing if you are earning money, while the information obtained with GOPPAR considers both set and variable service production costs. It considers the efforts, injuries and deterioration of the squad after each match so the team can finish in the league’s top positions, where the world’s biggest clubs find themselves. It can be said that the RevPAR and GOPPAR stage involves moving from pricing to full costing.

Likewise, you can’t forget that the scoreboard in this particular league is ADR or average daily rate, which is calculated at a certain time. Obviously, balancing the number of games won and games lost then calculating the average provides interesting data that enables you to check what stage you’re at.

Although there are many other elements involved in revenue management, like a football match, it’s clear that through great effort, in addition to a great team, manager and score in your favour, it’s difficult to be relegated. In addition, if you manage to “sign” your best rates without intermediaries, therefore strengthening direct sales and your most profitable channel, it’s highly likely you’ll end up celebrating victory.

Even still, don’t forget that it’s also essential to play on a good football pitch, which is why big clubs have turned their stadiums into a reference point for fans and non-fans alike. Paraty Tech offers hoteliers the chance to play in such a stadium that offers solutions against complicated situations with specialised software that enables us, among many other things, to compare your rates with those of the competition, control what is said about you after every match, and increase the number of tickets sold. In short, a victory guaranteed to optimise profits.

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