Revenue management is a solution that allows the hotel industry to perform multiple activities. It is based on the study of past business performance and the analysis of future demand, allowing for current planning aimed at optimizing offers and pricing with greater precision and efficiency.

In this article, we identify some of the basic aspects of RMS that are suitable for small-to-medium sized properties like ours in Volterra.

Revenue Management System (RMS)

Revenue management is a key concept in the hospitality industry. It involves integrating all available data to process, forecast, and sometimes plan demand. The results can be used to make strategic decisions about acquisitions, services, and pricing. Wise revenue management translates into selling the right room/house to the right customer, with the right services and experiences, at the right time, at the right price, through the right distribution channel.

Revenue management systems today are comprehensive software packages with a wide range of features. The most widely used feature is the ability to calculate ideal rates for rooms and rooms, using algorithms that combine occupancy data, market analysis, key performance data, and revenue estimates.

For proper hotel management, the revenue management system (RMS) must be supported by a property management system (PMS) connected to the OTAs in real time (Channel Manager), a booking and payment software (Booking Engine) and a customer relationship management system (CRM).

Importance of an RMS system for departments

Useful data for defining a revenue strategy

OTB (occupancy On The Books)

The OTB is the forecast data that shows the occupancy and revenue generated to date and forecasted for the future. It allows you to “snapshot” the current state of your season and compare it with previous years to assess the hotel’s performance. Generally, occupancy should always be slightly higher than in previous years. This is because, if the hotel has done well, each year it increases its contacts, learns from experience, and refines its marketing efforts.

 

ADR (Average Daily Rate)

The ADR (Average Daily Rate) is an indicator to be monitored constantly and used by comparing it with OTB and market data. The goal is to verify whether we are selling at a fair price. This data emerges from the comparison between occupancy percentages and sales price percentages and follows the usual comparison principles of previous years expressed in the OTB.

 

TURNOVER ANALYSIS

Occupied rooms and a full calendar don’t automatically mean we’re doing well. The opposite can also happen. If rooms were sold at a low price, a full hotel may generate a lower return than in previous years when we sold at higher prices. This analysis becomes even more significant if we analyze the resources required to manage different occupancy rates (more or less employees) as well as the reason for this price difference (quality of stays).

 

MINIMUM STAY

The minimum stay is the setting that defines the minimum number of nights required for a reservation at your property. It’s a very important tool in hotel management if managed wisely. It’s important to note that longer stays have lower overhead costs and allow for better understanding of your guests. They’re undoubtedly preferable. It’s also important to note that each property has its own occupancy policy. Let’s take the example of agritourisms that often sell week after week and city hotels that sell night after night. Generally speaking, we can say that good minimum stay management involves planning the year ahead with multi-night stays and then gradually modifying it, with the goal of having as few days as possible with unsold rooms and properties in between. A good PMS, complete with channels and an engine, allows for effective management.

Revenue Management KPIs

Hotel KPIs (Key Performance Indicators) are fundamental metrics for evaluating a hotel’s operational and financial performance. They allow for optimizing revenue management strategies through constant monitoring of occupancy, revenue, and profits. Proper management of KPIs allows for strategic decisions, dynamically adjusting prices, identifying areas of strength and weakness, comparing performance over time, and maximizing operating profit and overall efficiency.

 

Employment Rate (Occupancy %):

Percentage of occupied rooms compared to available rooms in a given period.

Formula: (Rooms Sold / Total Rooms Available) \(\times \) 100.

 

ADR (Average Daily Rate):

Average daily rate applied to rooms sold.

Formula: Total room revenue / Number of rooms sold.

 

RevPAR (Revenue Per Available Room):

Average revenue per available room, essential for evaluating the combined performance of occupancy and price.

Formula: Room Revenue / Available Rooms (or ADR x Occupancy %).

 

TRevPAR (Total Revenue Per Available Room):

Measure total revenue (rooms, restaurant, spa, etc.) for each available room.

 

GOPPAR (Gross Operating Profit Per Available Room):

It indicates the hotel’s operating profitability, taking into account operating costs.

 

RevPOR (Revenue Per Occupied Room):

Average revenue generated exclusively from occupied rooms, including extra services.

 

NRevPAR (Net Revenue Per Available Room):

RevPAR net of acquisition costs (OTA commissions, marketing)

Frequent situations and related KPIs