Increasing RevPar without sacrificing margins or brand value

Hotels are being pummeled by the economy, and the hospitality industry is suffering in every corner of the globe - what else is new?

Published: 06 Mar 2009

Hotels are being pummeled by the economy, and the hospitality industry is suffering in every corner of the globe - what else is new?

In the current climate, most hotel experts are expecting RevPar (revenue per available room) to drop by as much as 11%, perhaps even more. And with occupancy rates already at all-time lows, this isn’t good news for the hotel business. In such a climate, many hoteliers will compete on rate, but this only creates a downward spiral of price competitiveness, and more pain for the long-term growth and sustainability of hotels’ revenues once the economy bounces back.

So how can hotels compete in this weak economy, looking beyond discounts? Is it possible to flourish, even during such a travel slowdown?

The answer is yes. I have seen proper revenue management take a struggling hotel from barely surviving to thriving, even as the recession bites deeper. One Miami-based property was struggling to maintain a 45% occupancy rate. After overhauling its revenue management system, occupancy jumped to 90 to 94%, with an increase in revenues of 70%. Too good to be true? Absolutely not. A fundamental building block of revenue management, RevPar is one of the most important metrics of the hospitality industry and absolutely possible with the right system in place.

For hotels, RevPar is key determinant of profitability. It’s what keeps the doors open, yet many hotels and chains still handle room occupancy and pricing in an old-fashioned and haphazard manner - reactively and rarely scientifically.

Times like these require greater efficiencies in everything from improving customer relationships and boosting loyalty initiatives, to improving direct marketing programs and not cutting back on service. None of these, however, can be sustained without optimising cost centers and profits. And on that basis, effective revenue management becomes an operational imperative, not an option. It’s time for hoteliers to think beyond discounts and so I have created a list of tips on how hotels can increase their RevPar, without sacrificing margins or brand value:

Supercharge your internet sales
Only web-based internet sales can compensate for what has not been sold in advance to fill your hotel. In 2009, the meetings and corporate market is slowing even more so sales efforts should be focused on the internet. This is the channel that discount-hungry travelers are using more and more frequently when booking travel, so it is vital to manage your hotel’s web presence to gain greater visibility and better positioning… which of course, means more sales.

Open your sales office at night
Hotel staff cannot manage Online Travel Agencies (OTA) allotments 24/7. So if you’re not adapting in real-time and making updates as travelers are out there shopping (even internationally) when you’re asleep, you are missing out on valuable RevPar dollars. As supply and demand fluctuate non-stop, you need to automate your pricing at night to increase your hotel’s profitability.

Increase sales by changing your rates more often
Once the OTA allotments are filled, your hotel is closed for business, with no one to reopen the online booking allotment. But as more bookings arrive, hotel rates should successively increase. Many hotels, however, leave money on the table because there is no one to change prices in real-time. In this economic environment where every dollar can make the difference between boom or bust, changing rates only once or twice a day does not make sense, or cents, anymore.

Use today’s technology tools to sell your rooms
Revenue and reservations managers get overwhelmed by day-to-day data entry. The manipulation of extranets, rate buckets, rate codes, allotments, promotions and page positioning has become so complicated that many leave rates stagnant in fear of changing the wrong codes or buttons. But no action can lead to no business. By automating the process, staff can focus their time and energy on the “big picture” such as strategy development, OTA market manager relationships, promotions, packaging, implementation, group values, etc. You know, all the good stuff.

Re-direct sales from your online competitors to your hotel
The evolution of the internet and the growth of online bookings, has made every hotel’s list of direct competition grow dramatically. But online is now a lifeline for the lodgings industry. There are many hotels to choose from in any particular area, but by increasing your hotel’s online visibility, managing complicated internet opaque channels, and having the perfect competitive rate always listed on your website while keeping rate parity and best rate guarantee, will lead to a substantial increase in sales. Pricing competitively at all times will keep your hotel in the front of your online competitors, and will re-direct guests to your hotel, keeping your rooms full and profits ticking over.

While this may sound like a lot of work, having the right revenue management system in place can wring the maximum amount of revenue from any hotel property – automatically - and free of human error. The added benefit of having such a system is that it frees managers to control pricing and other crucial variables in a proactive rather than reactive manner. Hotels can increase their occupancy rates and manage their distribution costs like never before.

Given the effects of the global economic downturn, managing RevPar intelligently and effectively is a necessity and savvy hoteliers are embracing this business practice in their own properties. Rather than discounting in an effort to increase bookings (and decreasing their profit margins in the process), they are optimizing their pricing and their online presence for increased bookings and revenue. They are thriving even as consumer and business travel continues to decline. So now the only question is - will you be one of them?

This article has been contributed by Jean Francois Mourier, CEO and Founder of RevPar Guru

Jean Francois Mourier is CEO & Founder of RevPar Guru, a company that has developed an alternative type of revenue management and real-time pricing solution (combined with automated online distribution) to help hotels maximize occupancy and increase their profits. The company’s Yield Dynamic Price Engine, an integrated revenue management and pricing solution, adds unprecedented power and real-time adaptability to the pricing process, leaving managers more time to run their hotels. Reach him at or visit for more information about the company’s services.

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