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But what is Revenue Management after all?

Revenue Management

You've almost certainly heard of the term "revenue management" or have seen it mentioned a few times, right?

But what is it? Let's demystify it and show you how it can be a handy tool to make your properties more profitable.

Revenue Management is not just "selling the right product, to the right customer, at the right time and for the right price", as Robert Cross immortalised it. Revenue Management serves to optimise the inventory and thereby manage to extract as much revenue as possible.

Revenue Management emerged as Yield Management in the 1980s in the airlines - which are still today the most prominent players in this form of management and which allow them to maximise their revenue by having their seats sold at different prices according to demand.

And that is the basis of revenue management. If you have a room, flat or bed that is on the market, and there is no demand for it, you set a lower price to make it profitable to cover the costs, but if that same room, flat or bed is sold at a time of peak demand, then you can sell it at a higher price and thus increase your revenue.

This management system works particularly well for inventories with the following characteristics:

  • With an associated fixed cost (e.g. rent)

  • Perishable. If it's not sold at that moment, it can't be sold anymore (e.g. if you don't sell a room/apartment on New Year's Eve, you can't sell it for that date)

  • Having more than one customer segment (different customers understand prices differently, and this makes them willing to pay more, or less, for a specific service)

  • Access statistical data with information about the behaviour of the markets and make forecasts about possible dates with more demand or high seasons.

But then, how can I increase my accommodation revenue by using Revenue Management?

It requires some initial effort, but we guarantee it's worth it - especially when you see your revenue grow from the first month.

First, you should identify the main seasons (high and low) of your accommodation and what values have been sold in the rooms/apartments in recent years.

Then, you should analyse the competition and understand what prices they are charging and which dates there is already low availability in the market.

With these dates defined, you should start creating a price table that consists of starting with a lower price (which should be distinguished between high and low season) and increasing according to your occupancy levels. You should do a daily analysis - in case the number of inventory is high, or weekly, so as not to miss any opportunity and sell a room/apartment at a price lower than the market is willing to pay.

Monitor the results and adjust whenever necessary. And remember, all the statistical information from previous years of your business and knowledge shared by Turismo de Portugal are your allies in perfecting this technique.

Putting revenue management into practice is simple and very necessary, especially in markets with intense competition and high demand.

Do you need help applying this management method to your property? Would you like to start but do not know how?

Talk to us.

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