If Revenue Management isn’t just “tinkering” with rates online, what is it? What are we really talking about?
Today, more than ever, Revenue Management is a complex and structured system of specific levers and actions. It’s not just about individual rate adjustments, even if they are based on accurate and advanced mathematical and statistical algorithms. Those alone are insufficient for maximizing hotel revenue, especially in the Italian market. Studies have indicated this for years, linking the evolution of the tourism market and purchasing behaviors with technological advancements.
The simple mathematical formula for setting the right rate was the basis of Yield Management but is no longer enough for Revenue Management. More is needed.
Based on my experience in the field, after supporting and analyzing hundreds of hotels since 2007, I can confirm that RM relies on implementing the “5 Major Levers of Revenue Management.” Let’s dive into what they entail.
1. Price Management
The Pricing Lever is the fastest and most effective in terms of increasing or slowing booking flow, especially with the amplification of the web. But any pricing activity must be contextualized; otherwise, it will be ineffective or even counterproductive, though the damage might not be immediately apparent. We need to analyze and adjust pricing according to the specific segment and target audience for that time of year, week, or day.
2. Product Marketing
Today’s landscape requires a shift from the Revenue Management approach of 10-15 years ago. We must understand the “buying behaviors” and needs of every potential target audience for our product. For marketing purists, this may feel like a “return to basics,” but it’s necessary in a world where data must be tracked and analyzed. This will likely lead to extreme personalization in hospitality services, moving toward a fully customer-centric Revenue Management model.
We need to understand What, Why, When, How, Where, and Who might “buy” our hotel.
3. Distribution
This lever, though tied to technological evolution, primarily reflects market demands and purchasing behaviors in the tourism sector. Distribution is a balancing act that requires continuous adjustments based on needs.
Distribution is a game of balance and adjustments based on our requirements.
There’s no better or worse channel—just one that’s more or less suitable for the specific context at a given time.
4. Front Office Marketing & Sales
Among all the levers, this is perhaps the one I hold most dear, as it aligns with my background and teaching focus. Quality of hospitality, proper communication, and guest loyalty should become the foundation of Italy’s tourism system. We’re talking about maximizing revenue opportunities from direct “1to1” interactions through technologies like email marketing. For example, contacting customers right after booking and offering an “opportunity” they missed out on with a possible discount or package upgrade.
But most importantly, we should maximize the potential of direct contact by answering the phone professionally, making the guest feel like an individual rather than a room number.
Develop “In-House Selling” as much as possible, promoting services from departments like F&B, Wellness & Spa, offering “a new regional menu crafted by our eclectic chef,” or “the magical touch of our massage therapist.” This maximizes revenue in ways few other actions can.
The Hospitality Industry produces something unique: human connections. This is what we call “quality of hospitality.”
5. Brand Reputation
Nowadays, no decisions are made without reading “reviews,” across all industries. While some might argue against this, I believe it’s an essential aspect. Decades ago, it was simply “word of mouth.” Today, we have Social Media, TripAdvisor, Trivago, Holiday Check, and other platforms. We should view them as “crystal containers,” amplified by the web. They reflect whatever is within, and if the content is valuable, they’ll become effective revenue drivers. Essentially, it’s good old-fashioned word of mouth.
The better your Brand Reputation, the higher your average rate can be.
Vito D’Amico, CEO MyForecast RMS