Grow Hotel Sales and Maximize Profits

The hospitality industry has definitely come a long way from its previous “heads-in-beds” concept of making money. Previously, occupancy was set as the main objective of properties and as a result, competition is based on pricing instead of value. It developed very little relationships in the marketplace and guests shifted from one hotel to another. In this type of environment, the instinctive reaction of hotel revenue managers is to cut their rates drastically in the assumption that this will improve yield management and maximize returns.

Fortunately, hoteliers soon saw their mistake and revenue management was transformed. The change was particularly driven by the tactics of American Airlines. The hotel revenue managers saw that the yield management being implemented in the airline can likewise be applicable in their hotels. Instead of just trying to sell hotel rooms, their attention shifted to revenue management based on the market supply and demand. RevPAR becomes the ultimate goal and other areas are designed to support this objective.

Boosting Hotel Revenue

By using RevPAR as a basis, the rates are set based on perceived market value, historic data, sales strategies, adjusted rate availability, and occupancy demand. But this concept can be taken one step further with profit maximization techniques. Focusing attention to the bottom-line will encourage hoteliers to trim down on unnecessary costs and invest resources where it is needed most. Once they look down the profit line, they will be able to open and close certain rate categories depending on the profitability of individual segments.

Despite the important of knowing the hotel’s true costs of operations though, it is disheartening to note that some hotel rate managers don’t realize what the real cost of sales are. Yet, they are making important decisions that impact the company’s profitability. Today’s hotel revenue managers need to be effective. No matter their actual job title, it is critical for them to know all the distribution channels they should give more attention to in terms of profitability.

Providing Value to the Consumers

It is certainly good if the hoteliers establishes sales target for each month and year. However, it is also important for the hotel sales strategy to meet the expectations of the market. The rates in the property should be reflective of the value the customers place on it. If it is too high, consumers will not pay. And if it is too low, the hotel brand may lose value and credibility.