Application of Revenue Management Practice in the Hotel Industry Essay

Application of Revenue Management Practice in the Hotel Industry - Essay Example Modern hotel revenue management brand varies extensively from that of more than two decades ago. Modification in the general handling of revenue management, inventory allocation, pricing strategy, use of information and channel management as concerns to revenue management tend to redefine the field. Similarly to how detailed past analysis might have a representation of the best pricing practice during the 1990s, apparently, the stock market-impacted algorithms exist in the cutting edge of modern pricing thought. Comparably, the highlighting on occupancy or average day to day rate, which might have dominion over revenue managers’ outlook over two decades ago has led to the dominance of revenue per available room i.e. RevPAR. Instances like this abound hence this article will endeavor to share all of the revenue management expertise with readers, in a series examining the modern revenue management’s best practices (Kimberley, Trevor & Juston 2008, p.12). Strategic Pricing Pricing tends to a feature of revenue management, which features a number of intriguing, as well as innovative developments recently. Whereas pricing has continued to be a significant driver having an effect on both occupancy, along with RevPAR, in the present environment surrounded by exceptional price transparency, rates have taken an even bigger role. Ascertaining the optimal rate to give to a potential customer tends to be one of the most significant concepts of revenue management. The basic fact that the appropriate rate- one that achieves the balance between replicating enough demand in maximizing occupancy, while at the same time, not deserting money on the table within the form of low down ADR turns out to be the key to a profitable revenue management strategy causing pricing perhaps the most significant concept of revenue management. Then how is a hotel capable of determining what the best rate has to be anytime? In the past, this would center on historical analysis, while , at the same time, computed by the application of a discount to a fixed rack rate. In this case, there is no achievement of the objectives of revenue management, and in a modern environment, they are incapable of providing a competitive advantage that is adequate; therefore, the best revenue managers, as well as revenue management systems are dependent on the stock market principles in the formulation of complex algorithms, which are capable of generating with exactness of the optimal rate. Apart from that, these systems tend to work perfectly in real time, thereby making subtle modifications at brief gaps of time in the maintenance of the best rate. Therefore, in this case, the two most excellent practices at work tend to be automation, as well as an advanced algorithmic tactic of pricing (Roy & Bob 2008, p.31). The Stock Market Pricing The rule of optimum pricing happens to be familiar to financial experts, especially those working with commodities. In the case of hotels, it turn s out to be a less familiar concept, yet there is no reason as to why this should be the case. High-performing hotels use a comprehensive system of revenue management, which sets prices on the basis of both historical considerations, as well as current market conditions, providing it twice the choice of pricing strategies that are more traditional. Subsequently, these systems happen to be a reflection of similar systems within the place at financial companies.