Most Common Hotel Revenue Management Mistakes

The 5 Most Common Mistakes in Hotel Revenue Management

Whether you’re just starting out, or you consider yourself an expert in revenue management we can always find new ways to grow and improve. Take a minute to evaluate your strategy and be sure to avoid these 5 common revenue management mistakes.

1. A Strategy That’s Too Restrictive

Sometimes multi-night demand just isn’t there. Test different strategies but give yourself plenty of time to react. With group sales and function space contributing to an ever-growing portion of hotel revenue, having the flexibility to deal with the volatility of group sales is highly important.

2. Following Competitors

You might decide that following another revenue manager’s strategy is a perfectly reasonable approach. You may have even heard hotel’s say that they’re “$5 under the Marriott” or “$10 under the Hampton” as a common practice. The problem with this approach is that you might actually be following a price optimizer.

Hotels that use price optimizers can have very volatile rates. If your hotel is “always under the competitor” be sure you’re always asking yourself “why”?

3. Not Working with Online Travel Associations

Regardless of how big your hotel is there will always be a time when you’ll need a boost in occupancy. At this stage there’s no excuse to not be on OTA channels. Negotiate the rates that work for you on Expedia, and the like, and give yourself the flexibility an online travel association can provide.

This is key if you’re relying on a handful of large group deals. In the case that an event or room block falls through, you can lean on an OTA to make up for a portion of the losses.

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4. Raising Rates with Nothing But Group Revenue on The Books

It’s highly important to look at your market mix. There might be a date on your hotel’s calendar,  that’s pushing 75%, maybe 85% occupancy. Sounds like a good time to raise rates, right? Well not if the majority of your bookings are group sales.

Simply knowing occupancy is never enough to determine your rates. You need to have a deep understanding for why your rooms are occupied, and where those sales came from.

5. Over-Pricing Relative to Your Competition

Huge music festival coming into town? Great! Time to get those room-rates up. But make sure you’re considering how those rates will start to compare to competitors in your area.

For example, a local motel with a $50 room rate, might be able to get away with a 200% increase in pricing. But once you get into higher pricing level, relative numbers become much more important. Now, that motel is competing with 3 and 4-star hotels at $200 a night. If guests are at the point where they’re already spending a premium, a $50 dollar difference for the 4-star hotel is suddenly much easier to swallow.

The same can be true for hotel revenue management. During a busy time of year, it might seem like a no-brainer to raise rates for furniture rentals, F&B and A/V. Before you do, take a step back and consider if these rates will serve to optimize profitability, or just push event planners up the price ladder to your nearest competitor.

What revenue management mistakes have you learned from? Drop us a line on @socialtables on Twitter to let us know.

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