Over the years, we have seen the impact of various technologies in hotels; however, there’s one tech that hasn’t been talked about much so far – hotel revenue management system (RMS). 

In this blog, I’ll give you various reasons to invest in a hotel revenue management software and challenges it can help you overcome.

What is a Revenue Management System?

As a hotelier, you might be aware that revenue management is an integral part of hotel operations. However, with time, this task has become complex due to numerous OTAs and the rising competition.

This is where the hotel revenue management software comes into picture. It’s an automated system that can forecast, update, and enhance your overall revenue, by considering various aspects. 

This kind of software is a MUST for every hotel.

Challenges That RMS Can Solve

Handling revenue in business is certainly easier said than done. It comes with its own set of hurdles that can be solved using hotel revenue management software. Here are some of them.

1. Challenge: Data Collection and Storage.

You might have heard that, ‘Data is the new oil’.

Having a huge amount of data that could benefit you in the long run is definitely an intangible asset. As for the hotels, they need to maintain yearly sales reports for demand forecasting and revenue projection. 

Collecting and storing such data is prone to discrepancies. Even if a single report is misplaced, it can create a blunder. 

Solution: Get a cloud-based RMS with unlimited storage

Hotel revenue management software are cloud-based solutions that provide unlimited storage capacity along with data security to prevent any sort of leaks. 

With the unlimited space, saving data becomes easy without worrying about its size. Moreover, cloud-based storage is safe as the data is encrypted, which makes it inaccessible to cybercriminals.

2. Challenge: Managing Multiple Platforms

It’s no secret that every hotel in some way or another is dependent on online platforms for bookings. These platforms include OTAs, hotel websites, and meta search engines.

However, most of the hoteliers struggle with managing rates, inventory, and offers on these platforms. Apart from these, maintaining rate parity is another hectic task.

Moreover, juggling between different dashboards is another challenge. 

Solution: Invest in RMS that supports easy integration

Well, using a revenue management system in hotels is the perfect solution to this problem. RMS these days can be easily integrated with various channel managers. 

Thus by using a hotel revenue management software, you can manage inventory as well as rates across all the online booking platforms.

3. Challenge: Annual Tariff Forecasts

Demand forecasting is crucial for hotels to make informed decisions.

However, it isn’t that easy. Hotels need to deal with piles of data and a lot of analysis. One slight error and it can cause a significant difference in forecasted figures. Doing this manually requires the use of formulas and a lot of calculations.

Moreover, a slight error in calculations can cause a tremendous difference in forecasted figures.

Solution: Opt for AI and ML powered RMS

Hotel revenue management software helps you with running forecasts by using a set of rules which can be changed with time. 

It’s kind of an algorithm which can be programmed while you deploy RMS at your property. Two kind of rules are used to achieve forecasts:

1. Static rule
2. Dynamic rule

While the former one is fixed, the latter one can be changed depending upon the location of the hotel, property size, and other criteria.

Since most of the RMS are powered by Artificial Intelligence (AI) and Machine Learning (ML), there are less chances of having an error.

4. Challenge: Market Analysis

Another major problem for many hoteliers is that a part of their time is consumed in market analysis (compset, market share, and ongoing offers across various online booking channels).

Solution: Go for a data-driven RMS

RMS is capable of conducting market analysis by leveraging data. Once you update your compset, booking channels, and hotel’s location, the system would automatically generate timely reports as per the defined algorithm.

Moreover, it’ll give you insights on your competitors and property’s performance across all the OTAs. And by using it, you can plan other strategies to improve your hotel’s performance on the online booking platforms.

5. Challenge: Monitoring and Updating Revenue Daily 

‘Daily sales recapitulation’ is one of the important reports in every hotel. It highlights hotels’ daily performances in the form of ADR (Average Daily Rate), RevPAR (Revenue Per Available Room), and ARR (Average Room Rate).

These figures are further used to update tariffs on a daily basis. Doing this manually requires dedicated timing. Moreover, if it’s a large property, this becomes way more difficult. 

Solution: Bring RMS into picture for 24*7 monitoring

At this point, RMS comes to your rescue with its unique feature to monitor your hotel’s revenue 24*7. 

Due to automation, it updates intelligent pricing on channel manager accordingly. Since you’ve already configured the details, you just need to sit back and relax.

6. Challenge: Managing Time and Money

Now that you are well versed with the benefits of the revenue management system and the problems it can solve, you might be wondering that this automation can cost a fortune.

But no, it’s exactly the opposite. Initially, when RMS was launched, it was specifically used by luxury properties having a plethora of services such as spa, gift shops, and multi-speciality restaurants.  

For budget hotels, investing in this kind of automation seemed like a futile step due to less inventory, low guest count, and seasonal operations. 

Solution: Get a customised RMS for your hotel

With time, things have changed. Hotel revenue management software these days are entirely customisable and tailored as per your requirements. 

Moreover, with an easy to use dashboard, it requires a couple of training sessions for the RMS providers to make hoteliers thorough with the working process.

After the setup is done, the hotel managers/owners just need to check the rates and inventory once or twice a day. This can help them in saving both time as well as money.

The post 6 Challenges Hotel Revenue Management Software Can Solve For You appeared first on eZee Absolute.

In this blog, we will learn about hotel RevPAR, how to calculate it and strategies to optimise it.

RevPAR stands for revenue per available room and is one of the most significant factors that build your hotel revenue.

When you understand the power of RevPAR, you can plan better room rates and increase your revenue. We have listed 10 proven strategies to increase your property’s RevPAR. Read the blog further to know all of them. 

What is Hotel RevPAR?

Hotel RevPAR stands for Revenue Per Available Room. It is a key metric that you should use to track your business performance.

It is pure room revenue and does not include additional services like food and beverages, spa, laundry, room service, tours or any service that a customer utilises during their stay. This way you can understand the value of every available room in the property.

RevPAR is calculated daily, monthly or yearly. 

Let us walk you through the RevPar formula to make you understand it better:

How to Calculate Hotel RevPAR?

Well, there are two ways by which you can calculate your RevPar: 

RevPAR = Rooms Revenue/ Rooms available

OR

RevPAR = Average Daily Rate (ADR) * Occupancy Rate;

Here’s an example to help you understand the formula better:

Suppose that you are a hotel with 200 rooms. The average daily rate of the hotel is $100. On any particular day, when the occupancy rate is 80% (i.e. out of 200 rooms, 160 are occupied), then total earned room revenue is $16,000. In this case, hotel RevPAR can be calculated as:

So, on that day you generated $80 per room. 

Further, you have to understand the fact that getting 100% occupancy by compromising your average daily room rate (ADR) is not beneficial.

To have a better profit percentage, you need to have a higher RevPAR.

Think about this: Do you want more money by charging a higher room rate with fewer guests? Or you’re willing to compromise your room rate and increase your occupancy? The choice is yours!

Now that you know, how to calculate hotel RevPAR, let me throw some light on,

Importance of RevPAR in the Hotel Industry

RevPAR is not just a KPI in your hotel revenue. It also helps you:

• Plan room rates better: With the formula, you can decide the profit you want to acquire from the rooms. Based on the profit percentage, you can calculate the projected RevPAR and then decide rates accordingly.
• Measure your business performance: As mentioned in the above point, with RevPAR, you can strategize profitable room rates. Similarly, if you have higher occupancy and RevPAR, then it means your hotel is performing great. 

Basically, these are the two key reasons to calculate RevPAR. Now, let’s explore the section that will interest you the most.

Proven strategies to increase your hotel RevPAR

We have seen that RevPAR is important. The question is, how to increase it?  There are multiple factors that affect your property’s RevPAR.

We have analysed all of them and formed these strategies. For better understanding, we have classified the strategies in two parts:

1. Primary strategies: These strategies will have a direct impact on your RevPAR. As soon as you apply them, you would see an immediate effect on your RevPAR. 
2. Secondary strategies: These strategies will have an indirect impact on your RevPAR. Applying these strategies, you won’t see an instant increase in your RevPAR. Instead, you will see the results gradually after over the period of time. 

Let’s first go understand the primary strategies.

1. Apply revenue management

Revenue management means selling the right room to the right customer, at the right time, and at the right price. 

Simply put, revenue management is all about adjusting the prices as per demand and supply. As and when the demand increases you have to increase your room rates. 

But, how would you do that frequently?

These days, integrated channel managers and booking engines can handle this occupancy-wise pricing on their own. All you have to do is define different occupancy slabs and set different rates for each slab. The software will automatically update the pricing as the occupancy level changes. 

When your rooms are being sold at the optimum price as per the occupancy, you‘d definitely get higher RevPAR and revenue.  

2. Implementing different pricing strategies

We have already defined that RevPAR is directly proportional to your ADR. So higher the ADR, higher will be your RevPAR. 

However, it does not imply that you randomly hike your room rates to such an extent, that your property becomes unsellable . 

You need to have a strategic approach to increasing your room prices.

For example:

• Have different pricing strategies for high seasons and low seasons, weekend and weekdays.
• Create different room rates for customer segments viz. business travelers, leisure travelers, and so on.
• You may also want to perform competition analysis and figure out the optimum rate for a room type in the market amongst your competitors to maximize your revenue. 

These are the few different pricing strategies that we recommend. You can explore other strategies from here. 

By considering different factors, you can not increase your RevPAR which will in turn increase overall revenue. 

3. Balancing your occupancy percentage and ADR

RevPAR is dependent on two important metrics- ADR and occupancy. All three of them work in sync. 

Many hoteliers still view high occupancy as the operational target, disregarding all other aspects of revenue management.

You should not only focus on having a constant ADR and 100% occupancy. To increase your hotel RevPAR, you can play around your ADR.

Let us give you an example for a better idea

If you are a hotel with 10 rooms, each costing $100. Now, on selling each room, you are getting $40 profit. Here, there could be two cases:

1.  On a particular day, there’s 100% occupancy. Either you sell all the rooms at constant ADR of $100 and earn a profit of $400. 
2. On another day, when there’s 80% occupancy. On that day, you can initially sell your 5 rooms at $100 and for the rest of the rooms, you can increase your ADR by 50$. In this way, despite having less occupancy than the previous day, your profit would be 620 $. 

So, this is how you can play around your ADR and increase your RevPAR. 

In reality, higher occupancy in many cases leads to lower profits, when the increased number of rental units doesn’t offset the loss in average rate.

4. Focus on direct bookings

Undoubtedly, OTAs play an important role in getting you more bookings. 

You see, there are always two sides of a coin.

On one hand, you are getting bookings, on the other hand, you are losing a significant chunk of your room’s revenue as OTA commissions. 

To compensate for this, you must focus on getting more direct bookings. All you have to do is, get a booking engine integrated with your hotel website, that is capable of converting your website visitors into bookers. 

Other than that, you can increase your efforts in getting more direct bookings. There are many ways through which you can increase your direct bookings via your website. You can explore them from here.

When you are getting enough direct bookings from your website, then you can gradually scale down your dependency on OTAs. 

5. Reducing cancellation rate

A high cancellation rate is a major pain point for hotels. And to be honest, it affects your RevPAR greatly. 

To save your RevPAR, you can have more non-refundable reservations. This won’t bring any changes to your cancellation policy.

Yet, putting up non-refundable reservations will definitely increase your occupancy and reduce the cancellation rate at your hotel. We have some solid strategies to reduce your last-minute cancellations. You can explore them from here.

These are the strategies that you can apply and you will see the increase in revenue straightaway. The results of these strategies will have a direct impact on your hotel’s RevPAR. 

Secondary Strategies

Apart from these strategies, there are certain actions that indirectly affect your RevPAR. Following those strategies will surge your revenue too. Let’s go through them. 

1. Save your side expenses

Let’s understand this by an example.

Say, you have a 20 rooms property. We o0pe and wish that there will be a 100% occupancy for the property for all 30 days of a month. But, that is a far reach. When you have a housekeeping team in-house, you have to pay them salaries regardless of what occupancy you have in a particular month.

To overcome this issue and save the expense you can opt for – uber for housekeeping. Instead of having a dedicated housekeeping staff 24*7, you can go through your arrival list, and then outsource the staff to get the housekeeping done. 

So, when you have more arrivals, you can outsource 3 people, and similarly, when you have fewer arrivals you can outsource fewer people. You can easily optimize your room expenses and thereby increase your RevPAR. Besides, you can also adopt IoT devices to save energy costs. `

2. Plan room rates as per length of stay (ALOS)

Trust me, mandating  ‘Minimum Length of Stay’ is still considered as the most effective way to increase revenue per room.

As RevPAR is directly proportional to the occupancy percentage, with this strategy you can increase your occupancy easily.  

To increase your occupancy rate, you can employ strategies using the length of stay restrictions as below:

Minimum length of stay: Accept long-termed stays instead of bookings with short-termed stays.
Maximum length of stay: Take reservations at discounted rates only for set maximum nights of stay

3. Manage your online reviews

Nearly half of all travelers book a hotel room by just reading online reviews. Therefore, it is important for you to focus on your hotel’s online reputation in order to bring in more guests and build your brand value.

Your hotel’s reputation has a direct impact on your hotel revenue. So you should not miss out on responding to all types of reviews. (Especially negative ones!)

You can try online review management software to streamline your response system. 

When your response to reviews gets punctual, your guests get strong confidence in your hotel brand, and your chances of getting selected by them increase. 

Well, to assist you in your response procedure, we have ready to use FREE review response templates as well)

4. Increase digital marketing efforts

Today, your potential audience searches for you on different digital platforms. Therefore, to attract your guests from these platforms, you need to have a solid online presence. 

Well, with digital marketing strategies you can increase your direct booking. Moreover, it improves the conversion rate of your website. 

You can try the following digital marketing strategies to enhance your online presence and get more bookings:

1. Interact via social media and videos 
2. Advertise on OTAs and metasearch engines
3. Start influencer marketing
4. Run online ads
5. Strengthen email marketing
6. Do regular blogging on your website

You can explore these strategies in detail from here. 

5. Run and promote loyalty programs

Running loyalty programs can be a proven strategy to increase your occupancy rate as well as RevPAR. As it attracts the existing guests to stick to your brand and encourages new guests as well. 

#Protip: If you don't have a loyalty program for your hotel, you should definitely consider having it. As it is one of the most assured marketing and revenue-generating strategies. 

It is important to note that loyalty programs work only if you offer rewards that provide your guests with some real value. You should reward them on the very next visit itself, instead of rewarding them after certain loyalty points are calculated.

This is how your existing guests will come back to you and choose you over other hotel brands. 

Relevant Read: 8 Practical Methods to Increase Repeat Guests at Your Hotel [Easy to Apply]

FAQs

Conclusion

So this was all about how you can increase your RevPAR. I have mentioned different strategies, direct and indirect strategies.  

You can start with a few direct strategies and a few indirect strategies initially for a certain time period. Study the results from these strategies, and then continue with the best-performing ones.

Now, if you want to dig deeper in your hotel RevPAR, then RevPAR has three subdivisions:

1. Total revenue per available room (TrevPAR): 

It is a sum total of net revenues from all the departments, rentals and other income for a particular period divided by the total available rooms during that period.

TrevPAR= Total revenue / Total available rooms

[Here, Total Revenue = Total Room Revenue + Spa + Breakfast + Bar + Mini Bar + Room Service + any other income]

2. Net revenue per available room (NrevPAR):

It is similar to RevPAR, except that it takes into account ONLY the net revenues you earned. It DOES NOT include your expenses such as distribution costs, transaction fees and travel agency commissions.

NrevPAR= (Room revenue-Distribution cost) / Total available rooms

3. Gross operating profit per available room (GOPPAR):

This indicates the actual profit you earned; after deducting your distribution costs, other operational expenses like maintenance, hiring staff, and more.

GOPPAR= (Gross operating revenue- gross operating expenses)/Total available rooms.

These are metrics just for calculating RevPAR, there are several other metrics or key performance indicators (KPIs) that you can read to measure your overall hotel business performance.  You can learn about them from here.

The post What Is Hotel RevPAR? 10 Simple Ways To Increase It appeared first on eZee Absolute.