By Ahmed Mahmoud
The hotel industry is an ever-changing landscape, like many other industries, it has been unpredictable over the past few years, especially in regards to revenue management with unprecedented growth and innovation. From advanced reservation systems to personalized guest experiences, technological advancements have played a crucial role in shaping the way hotels, resorts, restaurant and others provide their services to customers.
As we approach the year 2024, it is time to look ahead and explore How to Get Revenue Management Right for 2024 with the top trends set to further transform this dynamic industry, where the sector is regaining balance and is witnessing significant shifts in revenue management practices. These changes are driven by the need to adapt to evolving market conditions, improve efficiency, provide the best experiences for hotel guests, and meet the changing preferences of guests.
The year 2024 stands as a beacon of transformation in the realm of revenue management. As the hospitality industry continues its journey of adaptation and innovation, it finds itself navigating a dynamic interplay of opportunities. This chapter delves into the evolving landscape of revenue management in 2024, exploring the trends and innovations that define this pivotal year into two major areas, the total hotel profitability and technology integration as below:-
Total Hotel Profitability
The hospitality industry is undergoing a significant transformation, driven by innovation and new business approaches. One key shift is the move towards Total Profit Optimization, which goes beyond simply maximizing revenue to consider all aspects of a hotel’s operation areas that contribute to hotel profitability. This approach involves leveraging data analytics to measure the performance of each revenue-generating area, including ancillary outlets, and identify the most profitable strategies. By adopting a holistic view of profitability, hoteliers can make informed decisions that drive sustainable growth and success. For many hoteliers, focusing only on top-line revenue doesn’t give enough context to make business decisions that truly drive a property forward.
So, how can hoteliers shift the mindset to true total profit optimization? It starts with connecting the data. Simply put, everyone needs to know their data.
To enhance hotel profitability, experts advocate for a multifaceted approach that encompasses driving ancillary revenues, adopting a total revenue focus, and leveraging technological advancements.
Profitability data plays a crucial role in fostering a holistic approach to revenue management, known as Total Revenue Management (TRevPAR).
Hotel owners and operational teams can optimize their performance by analyzing key metrics from various perspectives, including per available room night (PAR), per occupied room (POR), and as a percentage of total revenues. Regular bottom-line insights are indispensable for a comprehensive benchmarking experience.
While room revenues have traditionally dominated hotel revenue streams, modern hoteliers recognize the untapped revenue potential within every facility and service. Total Revenue Management (TRevPAR) expands beyond room bookings to encompass areas like food and beverage, spa services, parking, and event spaces. This broader approach prioritizes enhancing guest experiences across all segments while ensuring each contributes meaningfully to the establishment’s overall profitability. To monitor Total Revenue Per Available Room (TRevPAR), hotels should harness sophisticated data analytics derived from each and every data point across P&L statements, and utilize revenue management technology, enabling them to detect market shifts faster than manual observations. This empowers them to gauge success potential and promptly respond to market changes, ensuring they seize every revenue opportunity. With this approach, hotel managers can concentrate on informed strategy development and guarantee top-notch service at optimal rates.
Key PAR indicators include:
- (TRevPAR) Total revenue per available room.
- (GOPPAR) Gross operating profit per available room.
- (EBITDA) Earnings before interest, tax, depreciation, and amortization.
- (LPAR) Labor costs per available room.
In 2024, hotels are expanding their focus beyond room revenue, hence revenue management can offer more for hoteliers beyond room revenue. However, revenue management extends beyond just room pricing. Hoteliers now notice that it should be applied to other if not all departments of the hotel brand, making sure each of them can work to generate optimal revenue.
Total revenue management then consists of imagining the entire hotel facility as an asset, knowing how different departments can optimize their prices, products, and services to generate profit.
The concept of total revenue per available room (TRevPAR) will gain even more traction, encompassing all revenue streams such as food and beverage, parking, spa services, and more. The objective is to optimize overall profitability by taking a holistic approach to revenue management, and by defining the different guest loyalty types needed, such as individual, family, group, or corporate account, properties can control their loyalty programs and define the right program parameters for each.
Revenue management, once a mere exercise in room pricing, has burgeoned into a strategic discipline. It’s no longer just about selling a room at the highest price but about crafting a holistic guest experience, ensuring the right offering reaches the right guest at the right moment.
TRevPar (Total Revenue per Available Room) is a key performance indicator (KPI) that measures how effectively a hotel utilizes its space for revenue-generating purposes. To maximize this metric, lodging operators must identify opportunities to increase profitability across various areas of operation.
TRevPar (Total Revenue per Available Room) can provide a broader and more generic evaluation of a hotel’s performance. It provides a more comprehensive view of how well a hotel is generating revenue because it includes revenue generated from amenities from room service sales, restaurant sales, bar sales, and more. This bigger picture view allows for more effective pricing adjustments to be made which can be traditionally neglected in a standard performance equation such as RevPAR.
Technology Integration
The hotel industry has witnessed a significant technological revolution in 2023, and it will continue during 2024 and beyond. There has been a noticeable surge in hotels integrating automated systems to streamline operations, reduce human error, and boost efficiency. The use of technology is increasing throughout the hospitality industry, from online booking to mobile check-in to virtual concierges and AI-powered chatbots. hotels are using also digital tools to simplify and enhance the guest experience. For example, hotels are implementing chatbots for 24/7 service, and restaurants are using virtual menus to reduce physical contact. However, while technology can improve efficiency, it’s also important to maintain a human touch and not lose the personal connection with guests.
Hotels are using revenue management technology to understand demand more accurately, enabling them to operate more intelligently. They utilize their revenue management system (RMS) not just to optimize pricing and assess the viability of group business, but also to plan staffing, support, and services they offer.
But with all the hype surrounding AI today, it’s important to differentiate between Generative AI and the Deep Machine Learning models driving revenue management. While Generative AI excels at emulating human input and, more significantly, output, it often isn’t adept at mathematical tasks. Essential elements for revenue management, such as hybrid forecasting models, data movement and cleansing, automated configuration based on best-use case scenarios, and exception-based management stand distinct from Generative AI’s current capabilities.
When combined with data analytics, AI expedites a number of routine revenue management processes. The production of various daily reports, for instance, has become more time-consuming due to the surge in data collected by hotels and the growing demand for in-depth analysis. This happened as hotels have matured and extended data capabilities; the sheer volume of data has increased tremendously.
The time and effort needed to sort through that data and extract insights has grown as this amount has expanded. “In concert, the reporting complexities have risen as revenue-management teams create newer reports to support newer use cases for pricing and decision management. Revenue management was the first major hotel business function to deploy advanced analytics at scale, making practices like dynamic pricing an industry standard, also controlled automation gives hoteliers the power to decide when and what to automate. It enables revenue leaders to easily define segments, room types, stay days, or seasons they want to run automatically, manually or in a hybrid format.
As artificial intelligence and machine learning increasingly power these predictions, hotel pricing and revenue management strategies are set to further evolve and present new opportunities for hoteliers across different departments to improve the performance and revenue outcomes for their properties. Our estimation based on some market research says that the field of hotel revenue management has entered a new era characterized by data-driven sophistication and more hotels are harnessing the power of data analytics to turn vast amounts of information into actionable strategies hence technology remains the cornerstone of revenue management in 2024 by the following:
- Artificial Intelligence (AI) and Machine Learning: AI-driven tools are at the forefront, enabling real-time pricing adjustments, in-depth competitor analysis, and precise demand forecasting.
- Unified Tech Ecosystems: The integration between Property Management Systems (PMS), Revenue Management Systems (RMS), and Customer Relationship Management (CRM) tools has reached new heights, ensuring a cohesive approach to revenue optimization.
- Extended Reality (XR): The amalgamation of Virtual Reality (VR) and Augmented Reality (AR) is enhancing guest experiences, becoming an integral part of marketing and, consequently, revenue management.
Conclusion
The objective of total revenue management (TRevPar) is to maximize the profit and income potential that hotels’ non-room revenue-generating areas have to offer. A few hotel companies have already begun to extend their revenue management strategies to their food and beverage outlets and/or event rooms, hence the move to total revenue management involves a shift from a tactical, short-term focus to a more strategic, long-term view.
It would be completely absurd to pretend that hotel distribution could keep functioning without some sort of technology or data aggregation given how complicated hotel distribution is becoming. In 2024, almost every property will be able to adopt a revenue management system thanks to the emergence of micro-service systems, agile PMS, and affordable cloud-native technologies. The hotel industry’s versatility and vision will be demonstrated in 2024.
The hospitality industry is positioned for unmatched growth as revenue management tactics become even more sophisticated, integrated, and guest-focused. The future is being shaped by the combination of human talent, state-of-the-art technology, and a renewed emphasis on the guest experience. This will allow all hotels, regardless of size or location, to achieve their revenue goals.
“Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com”
