Top 12 Strategies for Maximizing Hotel Profits Using Advanced Revenue Management Systems (RMS)

Hotel Revenue Management Systems (RMS) is there to help hoteliers with their day-to-day revenue management tasks and take over some of the manual tasks with their automation.

The most important task of the RMS is setting the best price for rooms based on various data such as past performance, competitors data, forecast, inventory and available channels. This ensures that the hotel has dynamic pricing and rates are continuously updated and monitored based on the above criteria to ensure that the room is sold at the best available rate.

While there are various Revenue Management Systems (RMS) present in the market, and the decision depends on the hotel’s size and needs, there are some strategic considerations before implementing a system.

1. Demand Forecasting

Utilize the RMS to forecast future demand accurately – broken down into transient and group demand, as well as by any forecast group or market segment.

This is done by analyzing historical data, market trends, and local events to predict when demand will be high or low.

2. Dynamic Pricing

Implement dynamic pricing strategies that adjust room rates in real time based on demand fluctuations and following trends.

This allows you to capture the most revenue during peak periods and remain competitive during off-peak times.

Additionally, it also allows the system to make the best decisions by recognizing and capturing patterns, as well as being able to anticipate better rates moving forward.

3. Segmentation

Segment your market into different customer groups and apply pricing strategies tailored to each segment. For example, corporate travelers, leisure travelers, and groups may have different pricing considerations.

This also means that these segments have different booking patterns and seasonality, hence you need to make sure they are all correctly distributed.

4. Competitor Analysis

Constantly monitor your competitors' pricing and adjust your rates accordingly. Making sure that the correct competitors are being integrated into the system.

You also need to ensure that you have similar products and sizes to the ones you’re comparing. This is the key, as you need to make sure you pick the hotels that the customers consider real competitors.

5. Length of Stay (LOS) Optimization

Encourage longer stays by offering discounts or incentives for guests who book multiple nights. This can help you increase occupancy and revenue, minimize shoulder nights and drive revenue.

6. Distribution Management

Use the RMS to manage distribution channels effectively. Ensure that you allocate the right inventory to various online travel agencies (OTAs), direct bookings, and other distribution channels.

Make sure that correct inventory, rate and restrictions are being distributed to different providers to maximize revenue.

7. Rate Parity

Maintain rate parity across all distribution channels to avoid rate conflicts and maintain consistency in pricing.

This is key especially since most hotels pride themselves on offering the lowest rate when booking directly on the hotel’s website. Therefore, it is important to review this and make sure parity is maintained.

Doing this will create guest confidence, as well as maintain a healthy average rate by capturing very low and unauthorized third-party rates to enter the system.

8. Reviewing Forecast Accuracy

Regularly evaluate the accuracy of your RMS's demand forecasts and adjust your strategies accordingly. Fine-tune the system to improve forecasting over time. It takes time for the system to learn, hence you need to continuously monitor and adjust.

It is important to let the system know that we want it to learn and make the correct decision in the future.

9. Seasonal Pricing

Adjust your pricing strategies seasonally or during special events to capture additional revenue during high-demand periods, while pricing more competitively with less restriction during low season.

10. Promotions and Packages

Create and promote special packages and promotions through the RMS to attract more bookings during slower times or to upsell to guests.

Packages and promotions catch the eye of the booker and invite them to explore the hotel even if they don’t end up booking the package and instead, they go with a simple room. They are great marketing tools as well.

11. Guest Feedback and Reviews

Monitor guest reviews and feedback on review platforms and social media. Use this information to make pricing and service improvements.

Also, to assess where are the areas of improvement within the service or the product offered in the hotel.

12. Monitoring

Revenue management is an ongoing process. Continuously monitor the market, adjust pricing strategies, and optimize your RMS settings to adapt to changing conditions.

The system will take time and effort to learn everything and start working. Therefore, continuous monitoring and reviewing are necessary to ensure the correct information is provided for the RMS and sound decisions are made that are positively affecting the hotel’s revenue.

By implementing these strategies and leveraging your RMS effectively, you can optimize your hotel's revenue management, increase profitability, and stay competitive in the hospitality industry.

Next up in: Revenue Management Software