Lessons in Revenue Management from the Stock Market - Managing Hotel Revenue Through Financial Principles - By Jean Francois Mourier
Perhaps it is the very longevity of the hotel industry that keeps it stuck in old-fashioned practices, particularly as it applies to revenue management.
It’s true, revenue management (also known as yield management) is a relatively new concept within hotel operations but its central components- pricing, inventory management, occupancy and average daily rate maximization - have always been integral aspects of running a profitable hotel, in any location. This may partially explain why hotels are often content to fall back on tried-and-true practices such as historical pricing when it comes to formulating a revenue management strategy.
These time-honored practices are not the only available options, however. Anyone who has been following this column for the past few years knows that a hotel cannot be successful, especially in today’s weakened travel market, without a strategic revenue management plan. Same goes for hotels without an automated, real-time revenue management system to make those strategic pricing changes all day, every day, day and night. What differentiates the best from the rest, is the ability to see innovation and be an early adopter of new pricing strategies before the competition does. But because the hotel industry is one that is rife with variables and ambiguities, and because the hotel product – the hotel room – is a perishable one, it is even more important that hoteliers find ways to mitigate this uncertainty.
A new approach that can yield significant increases in a property’s occupancy and RevPAR is one based on the principles of the most unpredictable environment of them all – the financial markets. From how hoteliers can incorporate the Black-Scholes model into their pricing strategy to how neural networks can be applied to monitor a strategy’s effectiveness and then react accordingly (all without the revenue manager lifting a finger, thank you very much), the stock market offers many valuable lessons for hoteliers and revenue managers who are looking to improve their occupancy and RevPAR.
Why is it that stock market principles can be applied so successfully to the hotel market? What specific lessons can hoteliers learn from the stock market? And how will those lessons translate into more heads in more beds, and more dollars in hoteliers’ pockets?
To find out the answers to these questions and more, download REVPAR GURU’s whitepaper called “Revenue Management Lessons from the Stock Market” here .
About REVPAR GURU
REVPAR GURU provides hotels around the world with an alternative revenue management software solution, to manage RevPAR intelligently and effectively, and deliver maximum profits. REVPAR GURU’s custom-designed Yield Dynamic Price Engine meets the rapidly changing needs of hotels in a demanding business environment - dynamic rate optimization, real-time pricing, integrated internet and extranet yield channel management, and GDS sales distribution, to increase a hotel’s RevPAR while maintaining rate integrity and automated rate parity. It is the only revenue management solution that automatically optimizes and updates hotel rates across all major consumer travel websites, based on all market variables and in real time, and provides a strategic room inventory control. Once deployed, hotels can boost their occupancy rates and cut their distribution costs dramatically. Headquartered in Miami, Florida, additional information can be found at www.revparguru.com or by calling +1.786.478.3500.
