Maintaining Rate Integrity to Increase Hotel Profitability

In the twenty years that revenue management was put into practice within the hotel industry, most of the philosophies and techniques that had been learned were from a strong economy. This presents a very challenging problem in today’s environment because hotel revenue managers are ill-equipped to deal with it. There is very little historical data that will show how yield management coped up during the tough times. Because of this, many hotel revenue management staff are still feeling their way and are committing trial-and-errors.

One notable mistake is that many companies engaged in the hospitality industry are dropping hotel rates in order to increase demand. This trend can be observed everywhere from the United States to Asia. Fortunately, there is still a significant number of hotel revenue management teams that has the current crisis in perspective. Even during the worst of times, many hoteliers strived to maintain rate integrity as not to compromise their future positions.

It should be noted that dropping prices is never an appropriate response. For one, it will take a lot of effort on the part of the hotel revenue management team to bring the price up again and increase hotel profitability. And for another, it will hurt the brand value so the hospitality establishment might not experience the full benefits of recovery once it happens.

Occupancy challenges can be solved with creativity, innovation, and appropriate yield management measures. It was widely agreed upon, in the Revenue Management Roundtable in Singapore, that strong emphasis should be given to the investment in tools, technology, and people. This is the best way to cope with the downturn. Going back to basics is important. If you get this right, then the hotel is operating on solid foundation. In no time, the establishment can experience more bookings, increased RevPAR, and profit optimization.