4Hoteliers
SEARCH
SHARE THIS PAGE
NEWSLETTERS
CONTACT US
SUBMIT CONTENT
ADVERTISING
Three Lessons that Hotels Should Learn from the Airlines.
By Jean Francois Mourier, CEO of REVPAR GURU
Thursday, 18th October 2012
 
Many hoteliers and revenue managers don't know that revenue management in hotels actually developed from the successes of airlines yield management practices.

I know what you're thinking: 'my hotel doesn't fly, so I can't use the same processes that an airline does. It just doesnıt make good business sense'

Actually, it does.

Hotels have many of the same issues and challenges that the airlines do: ³perishable inventory, customers booking in advance, lower cost competition and wide swings with regard to balancing supply and demand.[i]² Hotels use the same websites and reservations channels to sell their rooms, as airlines do to sell their seats.

Hotels have to manage rates and occupancy, just like airlines do. Even the factors that are examined in a successful yield/revenue management practice are the same:

1 ­ Number of seats/rooms available?
2 ­ How much time is left to sell the seat/room?
3 ­ What are your competitors charging for the same seat/room?

So, if airline yield management and hotel revenue management came from the same source (the airlines) and are based upon many of the same business challenges and pricing factors, then why are the two industries so different today?

To be honest, I donıt know why the hotel industry hasnıt adopted the sophisticated algorithm-based revenue management technology that the airlines have. But Iım willing to give you the benefit of the doubt in that you probably didnıt know about how successful the airlines have been using yield management. So Iım here today to tell you the three lessons that your property can learn from the pricing experts at the airlines.

Lesson #1: Consumers already understand and expect fluctuating prices from airlines, so why arenıt the hotels doing it too?

This one is pretty self-explanatory. Letıs move on to 2.

Lesson #2: Algorithms, algorithms, algorithms

As I mentioned earlier, hotels and airlines use the same factors to determine rates. The major difference between airlinesı yield management and hotelsı revenue management processes are that the majority of hotels analyze all of the data collected manually, whereas airlines use sophisticated algorithm-based systems to analyze, interpret and price their seats.

Wait, did you think that American Airlines uses a channel manager? Nope, theyıre more high-tech than that. And your property should be too. Especially since airlines are competing in a much smaller market (there are perhaps 20-40 airlines flying to any given destination) than hotels, where there could be 500 different properties in a single destination. Thatıs even more reason for hotels to get on board with automation and rate fluctuations, all handled by the capable bytes of a sophisticated algorithm-based revenue management system.

Surprisingly, there is only one company that offers a full-automated, algorithm-based revenue management system. Can you guess who that is (wink, wink, nudge, nudge)?

Lesson #3: Price your rooms based upon what the market will bear.

A very common pricing strategy for hotels is to offer a set price while the property is at 0-50% occupancy, but once occupancy goes above that point, rates are increased. In most cases, this results in a high volume of bookings from 0-50% occupancy, and then a huge drop-off of sales once the rate is increased. Obviously, this often leads to hotels with lots of empty rooms (and lots of empty space in their wallets as well).

Airlines do it better. Rather than changing rates at random intervals based on their capacity, they consistently update their rates (automatically, of course) to ensure that they are offering the best possible price that will still secure bookings. Airlinesı prices are based on what the market will bear all the time, from 0-100% capacity.

A hotel at 20% occupancy isnıt a rare occurrence (especially during the off-season) but when was the last time that you saw an airplane that was only 20% full? So take a lesson (or three!) from the airlines in order to increase both your occupancy and RevPAR ASAP. Your revenues will be soaring sky-high in no time (pun intended!).

[i] en.wikipedia.org/wiki/Revenue_management#History

About REVPAR GURU
REVPAR GURU provides hotels around the world with an alternative revenue management software system designed to deliver maximum bookings and profits, as well as the convenience of full automation and integration 24/7. As REVPAR GURU's custom-designed Yield Dynamic Price Engine is the only real-time revenue management system available on the market, it meets the rapidly changing needs of hotels looking to increase their competitive advantage in an increasingly difficult marketplace. REVPAR GURU's system offers dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management and GDS sales distribution, to increase a hotel's RevPAR intelligently and effectively, while maintaining rate integrity and automated rate parity. Since 2004, smart hoteliers worldwide have used REVPAR GURU's software system to increase occupancy, average daily rate (ADR) and RevPAR.
 
Headquartered in Miami, Florida, additional information can be found at www.revparguru.com or by calling +1.786.478.3500.


Global Brand Awareness & Marketing Tools at 4Hoteliers.com ...[Click for More]
 Latest News  (Click title to read article)




 Latest Articles  (Click title to read)




 Most Read Articles  (Click title to read)




~ Important Notice ~
Articles appearing on 4Hoteliers contain copyright material. They are meant for your personal use and may not be reproduced or redistributed. While 4Hoteliers makes every effort to ensure accuracy, we can not be held responsible for the content nor the views expressed, which may not necessarily be those of either the original author or 4Hoteliers or its agents.
© Copyright 4Hoteliers 2001-2024 ~ unless stated otherwise, all rights reserved.
You can read more about 4Hoteliers and our company here
Use of this web site is subject to our
terms & conditions of service and privacy policy