Revenue management refers to a series of practices that a lodging business can employ in order to develop a more effective pricing strategy based on demand. In a nutshell, demand-based pricing can help a lodging company increase its profitability, grab a larger share of the market, and optimize the way it does business. However, not all lodging companies use revenue management to improve their financial results.
Does Your Company Really Need Revenue Management?
As a general rule, travelers are willing to pay more for a vacation rental that provides a wider range of amenities and services than other comparable properties. But most guests are also willing to pay a higher nightly rate during the peak season or when they book properties through specific distribution channels (e.g. channels that offer some form of guarantee, such as Airbnb, Vrbo, and Booking.com).
Considering that a vacation rental management company only has a limited number of properties to offer, developing the right pricing strategy for each rental is the only way to maximize earnings. Revenue management can help you with that!
When it comes to revenue management, your company is faced with two choices: the first one is to outsource or hire a revenue manager; the second one involves opting for an advanced PMS solution, like JANIIS, which comes integrated with revenue management software. Compared to outsourcing or hiring a dedicated revenue manager, which might be cost-prohibitive, particularly for a small or midsize company, getting a PMS system that includes certain revenue management features, such as a built-in seasonality pricing tool, is often more cost-effective. The reason is that an advanced PMS system provides a complete suite of features in addition to specific revenue management functionality. With the help of those features, a vacation rental property manager is able to organize, execute, control, and monitor a wide variety of business activities and operations.
To better understand the reasons why your lodging company needs a revenue management system, especially in the current economic climate, here are the most important benefits it can provide.
Improved financial performance – While ensuring maximum occupancy is important, renting out vacation rentals at a low rate might not be profitable. Thus, when managing vacation rental properties, you should focus not only on getting more bookings but also on making enough profit from each reservation. One of the advantages of using revenue management software is that it analyzes historical data along with a series of metrics, including the occupancy rate, adjusted occupancy rate, average daily rates, revenue per property, etc, to help you set the right nightly rate for each property and adjust it according to market conditions. To help you maximize your earnings even more, an advanced revenue management solution will also allow you to calculate the profit you’re likely to make based on your pricing strategy. This enables you to try out different strategies and choose the one that can generate more profit for your business.
Lower Operating Costs – The hospitality industry is one of the most volatile sectors in business today. As booking trends are dependent on a number of factors that can change on a daily basis, the best rate for a vacation rental today might be very different from the optimal rate tomorrow. Besides helping you determine the best rates for your properties on a daily basis, the right revenue management software solution will also enable you to plan ahead. As a result, you can easily avoid both overstaffing and understaffing and also optimize the use of other resources. Since you’ll be able to manage resources more efficiently, a lodging management system integrated with revenue management can help you avoid unnecessary expenses. This will lower your operating costs considerably. In addition, revenue management software is sometimes offered as part of an advantageous package deal, which can save your company even more money.
Enhanced Property Owner Retention Rates – In general, there are two main reasons why property owners choose to hire a management company: 1) to avoid the hassle of managing different aspects relating to rental properties; 2) to obtain the best possible return on their investment. By improving the financial performance of the properties you manage, the right revenue management software solution will help you not only meet owners’ expectations but also exceed them. Since this will allow your company to distinguish itself from the competitors that don’t have a lucrative revenue management strategy in place, you’ll be able to grow your business by attracting more property owners, boosting your retention rate, and expanding your portfolio.
The right lodging management solution equipped with an advanced revenue management system will help you make more informed, data-driven decisions rather than relying on guesswork and intuition. While it’s true that the lodging companies operating in smaller towns might not need a complex revenue management solution, as much as the companies that face more intense competition in larger cities, a lodging management system, like JANIIS could help any company increase its occupancy rate as well as maximize its profit margins. But the really good news is that all the convenient, time-saving, and innovative features included in our lodging management solution integrates easily with different systems. If you’re looking for a way to provide a superior experience to guests, property owners, and employees, book a demo today!