Revenue Management: an effective tool in attaining top line revenue outcome

By Josephine Wawira

Are you selling the right product/service, to the right people, through the right channel, and at the right price? Basically, how viable does your Revenue Management place your business in the competitive industry? In the hospitality, travel, and tourism sectors, for instance, commoditization and intense competition rule the day. While players use strategies such as marketing (both online and offline) and innovative technologies to stay aloft the industry, revenue management remain largely underutilized; yet it is one of the most effective tools in attaining top line outcome.

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Image by Dusit

Revenue management is therefore a vital part of any business in ensuring that target customers are offered the best price guarantee. In this case, leveraging price is everything; but also, bear in mind value-based pricing that will warranty your business profitability while at the same time offering the lowest price in the market. The primary factor is to be confident that cutting the price will at the least guard your profit margins if not at the best increase it.

Discounts/Special Deals as options

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Beyond profitability and beating competition, the revenue management effect spreads to other aspects of a business strategy such as improved customer satisfaction. In most cases, this is achieved through provision of discounted prices and special deals especially during holiday seasons such as Easter. Since these are short term strategies mostly covering a set sporadic campaign, it is important to communicate effectively to customers; to avoid discrepancies when resuming normal prices.

For instance, if an online hotel booking agency offers special deals, then communication must be done to partner hotels as well as customers so as to get maximum ROI (Return on Investment). Miscommunication or lack of it thereof could be disparaging to the agent’s long term efforts to reach more customers with the discounts or even worse, lack of cooperation from hotels. The revenue management team is then tasked with guaranteeing price parity, meaning the prices they receive from hotels are similar or lower than those provided by the hotel itself and other booking sites.

Lynn Zwibak, Head of Revenue Management for Jumia Travel Kenya, notes that “hotel rooms are perishable inventory. If a room goes empty for a night, you can never sell it again. However, the incremental cost of selling that room is small. Revenue management allows a hotel to fill these otherwise empty rooms by targeting different customers with different rates. When done correctly, a hotel can maximize ADR (Average Daily Rate) from its top guests, and maximize occupancy with discounted rates from untapped market segments.”

Finally, pay extra attention to a well-designed pricing package and value-added supplementary services which will get the customers willing to pay. These could include all-inclusive packages, loyalty programs, and room upgrades in the case of hotels. Do not ignore the fact that different customers have varying needs and thus different expenditure budgets. If well strategized and implemented, revenue management is capable of driving revenue growth and the company’s overall performance.

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