5 Reasons Revenue Management Can Save Your Hotel During a Market Downturn or Crisis

If there’s any one thing the current economic climate has shown the hospitality industry as a whole, no matter how strong the demand has been, no matter how stable the market has been, and no matter how high the market is, at anytime hospitality operations and especially hotels must be prepared and ready to shift strategies to manage the unexpected.

As we today face an unprecedented change in market climate we know as we know many of us will be frustrated or stressed trying to work towards finding success and stability as we exit the crisis. If you are not sure yet what to do or prioritize to ensure your success and stability both during and as we exit the crisis, I’ll share the secret with you. It’s simple! Install, improve, or enhance revenue management strategies at your hotel, motel, or condo rental! Many may ask, ‘Isn’t revenue management for making more profit? How can it help when there’s no demand?’

Well the answer is simple. Revenue management isn’t really focused on profits, it’s focused on maximizing overall revenues through various business strategies.

‘Isn’t that the same?’ you may ask.

No, it really isn’t. With revenue management we’re focused on not only profit but on maximizing revenue. It’s about selling to the right client, at the right time, at the right price. This focus allows us to do two things that are integral to surviving and ultimately being successful both during and after market downturns. 

First it allows us to target the right guest with the correct rate at the right time. Consider that where guests are coming from may shift seasonally, age demographics may change seasonally or even weekday vs weekend.

Second it allows us to strategize the eventual exit of the downturn. As an industry we have seen throughout history that as sure as the market falls because of global, national, and local events the market will recover again.

Now that you understand what about revenue management is key and why, here are five specific things revenue management will do for you that helps save a hotel during severe downturns. 

1) Improve Cashflows: Simply stated, basic revenue management will long term help improve your cashflows. Your cashflows are extremely important during a downturn. In significant downturns we see sagging or limited demand but maintain significant expenses.

2) Improve Market Share: The second reason here is arguably the most important, improving market share. Ideally, since we wont be able to produce our normal results, we want to get as close as possible.

3) Optimizes Labor Costs: Here we consider optimizing labor costs. We do this by our revenue forecasting determining how much labor is necessary.

4) Increase Revenues: Post downturn, our goal is to increase revenues and return to ‘normal’ as quickly as possible. Revenue strategies seek to forecast (notice a pattern on this basic revenue task?) our futures and using this we develop a strategy to shift from what may be less profitable business to identify and target the most profitable business as we predict the changes.

5) Developing Loyalty Strategy: Lastly but still highly importantly a developed loyalty strategy. Typically most don’t equate loyalty programs with revenue management, and certainly not with surviving a downturn. However the ‘secret’ is really, this is how many chain hotels survive downturns and maintain market share while others fall or struggle.

After reading this I’m sure you will agree revenue management is key right now and during market downturns in general. Regardless of your familiarity with revenue management, we would love to help you.

Click here so we can work to evolve your strategies together.