Costly Revenue Management Mistakes Hotels Should Avoid Making

June 15, 2010

When the market is turbulent and the guests scarce, every tiny mistake feels more like a mountain to scale than a molehill to jump over. During such times, mistakes are easily made. Going with the motto ‘forewarned is forearmed’, here is a list of revenue management mistakes that you should avoid making as they can prove to be costly:

1. Don’t jump onto the discount bandwagon. Yes, discounting is an effective way to increase occupancy levels but you shouldn’t undercut yourself to such an extend that you can’t afford to pay your bills or restore your rates to their former levels once the economy recovers.
   
   
2. Human being have intelligence, software’s don’t. Do not leave your revenue management and strategizing to your revenue management software, you are just setting yourself up for failure.
   
   
3. Be futuristic. Every business has short and long term goals. Do not undermine your future success by always giving your short term goals priority over long term goals. For example, by over discounting to fill rooms now, you undermine your potential room rates in future. This is especially true when negotiating rates - current and future with corporate clients.
   
   
4. Cost cutting during turbulent times is expected but don’t completely cut out your marketing budget on the belief that your strong hotel brand will automatically sell your available room inventory. Marketing is essential at all times. If you need, reduce marketing spend by developing a more cautious plan or choosing less costly options but continue to market.
   
   
5. Strategy is always important but more so when it’s a buyer’s (guest’s) market. Study your customers, understand their need and problems and be aware of the latest trends. Only then plan your strategy and pricing for weekday and weekends. This will ensure you continue to fill your rooms.
   
   
6. Don’t underestimate the value of a ‘Value Package’. Yes, the number of bookings are much lower and people are looking for discounts. Don’t forget that they are also looking for value. A package that is higher priced but offers more value is often the choice of the savvy traveler. If you are uncertain of how to segment your guests and create package, offer guests choice on differentiators like room size, view, amenity etc. and they will segment themselves for you.

In short, when all things go to hell, remember the basics. At every opportunity, seek ways to fence off the low rates you must offer. If you absolutely, positively need to discount, try to use the opaque channels first. This will ensure that any guest who want your specific property and are willing to pay for it will not get the discount.