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We had a chat with a revenue management expert for useful advice and best practices in revenue optimisation.


Q: Tell us a bit about your experience and background

I started my career as a Revenue Analyst in Czech Airlines many years ago. Afterward, I created and optimizing pricing strategies, analyzing the demand for different companies. However, I always wanted to return to Revenue Management as it is a perfect combination of analytical skills, knowledge and clever use of data and tools to actively help a company optimizing the most essential metric – revenue.

Last year I excitingly took on the role of a Revenue Optimisation Manager in Bohemian Hostels and Hotels and faced two big challenges– the new environment and the development of tools. I was counting on my experience from the airline industry as there are some similarities, and I complimented past experience with professional knowledge about Hospitality Revenue Management from Cornell University course. Furthermore, and most importantly, I developed my own knowledge & experience.

Q: What is the most common revenue management mistake you encounter?

The most common mistakes are simply not getting the basics of revenue management right: including techniques such as measuring results, making sense out of data, offering prices and products according to market demand, as well as having an efficient control and fast response to the market.

A common revenue management mistake would be applying the typical sales logic of ‘volume is always good’ which is valid in many other industries. That logic often does not take into account that for example, a big group might displace other higher-paying guests because the capacity is limited in hotels. Managing the booking source is commonly overlooked as properties tend to go for “fast and easy” booking sources.

I think this is an important observation because the booking source affects the type of guests you get, for example, relying on big groups. In turn, this will affect the atmosphere in your property. This is why it should be taking into account ahead of time, and the optimal booking source metrics should be planned as part of the overall strategy.

Q: From your experience, what is the difference between managing revenue in a hotel VS in a hostel?

Firstly, one must take into account the considerably different customer segments and customer behavior. By that, I don’t mean that hostels’ guests are exclusively backpackers. We offer a boutique hostel product that is attractive not only because of its affordable prices but mainly for its social environment!

Hostels guests are much more price-sensitive and flexible in terms of time and location compared to hotel guests as we can see in a completely different shape of the booking curves. There is a different booking behavior and there are even different seasons. The hostel guests are late bookers, often booking just a few days before arrival, compared to hotel guests. Accordingly, we use different RM techniques. For instance, different price conditions based on age, length of stay etc.

Q: What are the most basic reports every accommodation provider should keep track of? And what advice would you offer for choosing revenue management technology and tools?

In terms of basic reports, I would advise every property to keep reports and track the Sale by room type (occupancy rates per room type and ADR), Booking Pace report, Sales by Source, Competitors prices of course, as well as keeping track of events and important dates in the city or area.

As for choosing revenue management tools, it is important to note Revenue management technology and tools should suit your business model, especially in terms of complexity. A proper analysis of the status quo and needs should identify what information or tools you are lacking, what could be developed in-house and if it would make more sense to buy tools off the shelf. The technology should enhance the quality and efficiency of decision making, as well as automate parts of the revenue management process. The user should understand how to use the technology, costs should be offset by an increase in revenue or other value. Wrongly chosen tools might just add complexity and costs. It is always helpful to talk to existing customers of the tools you are considering and sharing experiences if possible. All in all, technology and tools are only as good as the users behind them and we cannot expect them to solve all of the challenges. Tools can only support great experts.

Q: Could you offer advice on how to determine floor and ceiling prices?

In theory, the price range should reflect the willingness to pay in the market, based on the products that are offered. The ceiling price should be the highest price a customer segment is willing to pay, floor price should be the lowest you need to generate demand and fill empty beds (but still being higher than variable costs to handle and serve the guests). In practice, how do you know what is a customer willing to pay? As is often the case in revenue management, it’s a trial and error process, accumulating knowledge based on past experiences, testing new strategies and learning fast. The competition is often an indicator as well as a limitation of course.

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About the author

Hi, I'm Tal Lavi, a hospitality enthusiast dedicated to transforming your guest experience to an unforgettable one. With a passion for crafting engaging narratives and deep insights into guest behavior, let me take you on a journey to the future of guest experience.

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