When a revenue manager is through with any tactical decision, write’s Ritesh Gupta, one question still looms large: are we leaving money on the table?

There may not be easy answers to this question but Andrew Lau, director of revenue management and distribution at Marco Polo Hotels, has this to say: “At all times, rates should be set in a way that hotels can maximise opportunities.”

If that sounds easy – or obvious – it isn’t; revenue managers are always faced with a bit of uncertainty. During high demand periods, for example, the question tends to be: is the rate high enough? But when demand is low, it is more like: is the rate able to maintain market share and capture competitors’ business?”

So, how can managers optimise rate efficiency? Here are five possibilities:

1.    Forecast more accurately: A solid forecast is a necessity while working on pricing and promotional initiatives. The benchmark for the level of accuracy is +/- 5%. “Forecast needs to be more accurate in order not to leave money on the table,” says Lau.

2.    Don’t discount too much: Too much discounting means the entire category drifts toward lower margins. “Deals make marketing and revenue management more difficult as guests are being trained to book at a lower price,” admits Lau. So while marketers busy themselves promoting deals, people become accustomed to this and then won’t book at the normal rate. Lau says that flash sales aren’t really an opportunity. “They will only attract the wrong group of customers who will not book at normal rates. The hotel will have more benefits by setting the right rate,” says Lau.

3.    Use efficient systems but use them wisely: An efficient revenue management system (RMS) can play a vital role in simplifying algorithms and help to forecast better.“One major trend is use of RMS for accurate ‘unconstrained demand’ forecasting by market segments to align pricing, and even evaluation of any business, that may impact non room products like conference space, food and beverage and so on,” explains Amit Kaushik, director of revenue management,  Madinat Jumeirah. He stresses that any system generated forecast is only as good as you ‘train’ it to be. Always ask: does your RMS know what you know ? “After all, all automated systems are machines that will work with complex algorithms based on information you as a user manage,” Kaushik says.

4.    Carefully evaluate the strength of each channel: A lot has been said about the mobile channel being last-minute but that might not be the case anymore. In fact, some hotel organisations say the share of regular bookings via mobile is becoming significant. Understanding lead times, length of stay and average booking value is important. But rate efficiency also needs to be complemented with weapons such as lead time pricing and value-added packages. Those who book six weeks in advance, tend to be value conscious rather than price sensitive. So offering a better experience here could work and firms should also look to capitalise on up-sell and ancillary revenue opportunities. Then, of course, it’s important to evaluate how a channel is performing over a sustained period of time, or during a specific promotion to assess demand.

5.    Look to real-time information: Pricing and market conditions are evolving all the time, so details like pricing amendments by competitive set hotels need to scrutinised in real-time. Today real-time inventory management isn’t only restricted to rooms. In an interview with EyeforTravel.com, Keith Hudspith, head of Food and Beverages at Premier Inn said: “We have seen how online real-time booking has impacted the hotel bedroom business and it is very likely that the same is going to happen with the meeting rooms over the coming few years.”

6.    Collaborate across the business: RM teams need to regularly collate data from other teams such as getting feedback from the e-commerce department on how the online direct channel is key to pricing and availability decision-making. They could also work in tandem with the distribution team or analyse information about reservation pick up trends by channel too.