Revenue Management

Revenue management is a concept within the hospitality industry that allows hotel owners to anticipate demand and optimize availability and pricing, in order to achieve the best possible financial results. 

Within the hotel industry, Revenue Management is widely accepted as: “Selling the right room, to the right client, at the right moment, for the right price, through the right distribution channel, with the best cost efficiency."

It involves the use of performance data and analytics, which serve to help hotel owners more accurately predict demand and other consumer behaviors. This, in turn, allows them to make more sensible decisions regarding pricing and distribution, in order to maximize revenue and, therefore, profit.

As a concept, revenue management began in the airline industry, where companies found ways to anticipate consumer demand in order to introduce dynamic pricing. However, it is applicable in any industry where different customers are willing to pay different prices for the same product, where there is only a certain amount of that product to be sold, and where that product must be sold before a certain point in time.

To carry out effective revenue management, a business must also have some way of forecasting demand and consumer spending habits, so that informed adjustments can be made. For instance, hotels can use past data, existing bookings, event calendars, weather forecasts, and other industry data to inform their revenue management strategy.

Revenue Management provides the ability to make the most out of a perishable inventory, allowing for the maximization of business revenues. Essentially, it allows decision makers to make informed, data-driven choices, rather than relying on instincts or guesswork.