Revenue management

Revenue management is a set of practices or techniques that consider consumer demand and set the optimal price for the product. In the hospitality industry, revenue management means selling the right room to the right client at the right moment at the right price on the right distribution channel.

The main components of revenue management are

  • customer segmentation (categorizing consumers to enhance personalization and identify customer behavior trends),
  • demand forecasting (predicting demand fluctuations),
  • inventory management (devising the optimal distribution strategy),
  • yield management (implementing certain tactics to sell the greatest number of rooms at the highest possible price), and
  • pricing (setting rates and applying optimal pricing strategies such as dynamic pricing, open pricing, etc.).

The effectiveness of revenue management is assessed with the help of such KPIs as occupancy rate, average daily rate, revenue per available room, total revenue per available room, and more.

Revenue management software helps automate the processes described above. Some popular revenue management solutions are Duetto, IDeaS, Atomize, RevPar Guru, and so on.