9 Common Myths About Hotel Revenue Management. Let’s Debunk Them.

Revenue management (RM) is supremely necessary for hotels.

While many hotels are making the best out of it to boost their bottom line, some are still thinking of it as a mythical unicorn.

I kid you not, most of the hotels refrain from opting for any sort of revenue management services.

Who is to blame for it?

The hotel revenue management myths that are swirling around are the real reasons hotels are so skeptical about it.

So, I decided to debunk some common myths about revenue management systems and managers and make your life easier. 

Let’s Bust Some Revenue Management Myths

Before going ahead to shoot down all the misconceptions, I have a little something to say.

“Do not shy away from revenue management. It helps you better manage resources, predict customer wants and needs, and come up with the most effective pricing strategies to boost your hotel’s revenue.”

Myth #1: Automation will eliminate revenue managers

With the rate at which automation is invading industry after industry, different viewpoints have emerged in the revenue management community. Many believe that revenue managers’ jobs would be at stake.

However, that’s just one of those hotel revenue management myths.

Although revenue management software is instrumental to many hotels, it is a tool that helps revenue managers do their job much more efficiently, eliminating manual tasks.

For example, a hotel utilises various channels to drive booking. But imagine how tedious it would be to adjust prices across all the distribution channels. This is where a revenue management system comes in; it does the job without having to individually log in to each of those channels.

Revenue managers are at the heart of this entire segment, without their analysis and decision-making capabilities, it is not going to be easy for hotels to reap the best benefits.

So, sit back and relax, revenue managers aren’t going out of the scene.

Myth #2: Revenue management is only for mathematics enthusiasts

When we talk about aspects like pricing, revenue, or budgeting, many think that it is the job of someone who has a strong grip on mathematics.

But in reality, it is not true again. Mathematics is a part of it and not the entire segment. If you’re a mathematician, perfect. If you’re not one, no problem at all, you’re still good to go.

Rather, hotels when hiring revenue managers, look for people who have an understanding of a hotel’s business indicators and possesses analytical thinking.

After all, it is all about predicting guests’ behaviour, optimising room availability, and selling rooms at the right price at the right time to the right guest, thereby maximizing revenue.

Myth #3: Changes in pricing must be handled by revenue managers themselves

Just like the ones who think that automation is going to wipe off revenue managers’ jobs, there is another set of people who have a misconception that price changes cannot be automated.

I really wonder who spreads all these myths of revenue management.

Let me clear this for you.

A revenue manager cannot spend all day logging into various channels and changing prices. That is the reason there are automated revenue management systems that do the job, allowing the revenue manager to focus on making important decisions.

Myth #4: Revenue management systems are always expensive

Another misconception that holds back hoteliers from incorporating a revenue management system is that ‘all these systems are expensive’.

Again, this is not true. Not all revenue management systems are expensive.

This myth has gained momentum because RM services are being adopted majorly by high-end accommodation providers. And this makes the budget players feel that they need a humongous amount of money to reap its benefits.

That’s not all. Initially, large hotel chains and properties were well aware of revenue management and they were quick to opt for it. But many budget hotels have refrained from learning about such strategies.

And I am not making this up at all, because I have had the first-hand experience.

In 2019, I was in Matheran. I booked a nice hotel. The property wasn’t a big one but it was beautiful and gave me a luxurious experience.

I was wondering how come they have not been able to scale. 

They had so much potential — the staff, service, rooms; everything about it was just so perfect.  But despite all of it, they were having a tough time increasing their profit.

A day before my check-out, I had a long conversation with the hotel owner. To be honest, I was surprised to know that he thought revenue management services are only for high-budget hotels as they are expensive.

Not just that. Someone even told him that it’s risky and he’d lose all his money.

So, you can imagine how many such hotels have half-cooked information like this.

Myth #5: Budgeting and demand forecasting aren’t important in revenue management

When it comes to hotel revenue management, budgeting and demand forecasting play a crucial role. And if someone has told you otherwise, you can just let that advice go; it is just one of the myths of revenue management.

While hotel budgeting helps in estimating revenue and expenses, demand forecasting allows revenue managers to predict future guest demand over a defined period.

Demand forecasting, Budgeting, and revenue management are all interlinked. For a smoother and profitable functioning of a hotel, they need to go hand in hand.

Meaning, when you have such information at hand, it gets easier to make informed decisions regarding a hotel.

Myth #6: Outsourcing revenue management services aren’t worth

Whoever has started this myth must have not checked the pros and cons of having revenue management in-house vs outsourcing.

Let me explain this to you with a scenario.

An in-house revenue manager, no doubt, will have a lot of knowledge and experience. But if you look closely, s/he spends most of their time working with only one property i.e. your hotel.

On the other hand, an outsourced revenue manager has more exposure. S/he works with various other hotels and gets a wide view of the industry.  

Meaning, they are skilled and have carefully developed techniques that help you improve your bottom line.  

Investing to outsource revenue management services is absolutely worth it. Just make sure the service provider has a proven track record of its work.

Myth #7: Overbooking is a curse and should NEVER be used

Overbooking can make or break a hotel; it is like a double edge sword.

However, calling it useless is one of the huge misconceptions about hotel revenue management.

If you aren’t aware of overbooking, it is a strategy used by revenue managers to acquire more reservations than the number of available rooms to achieve the highest possible occupancy rate.

What does a hotel want? 

100% occupancy rate and better revenue. 

If used cautiously, with proper planning, analysis, and calculation, it can significantly help you achieve the same.

Myth #8: Revenue management doesn’t help hotels already in loss

I am sure many of you have heard this — “You’re already in loss/not making enough revenue. Why would you want to invest in some revenue management service?”

If you have received such advice in the past and believe that revenue management services cannot help hotels in loss, then let me burst your bubble. It is a huge misconception.

The prime job of a revenue manager or a revenue management service provider is to bring you dollars.

Now, if you’re wondering how would you pay for such services? There are a lot of service providers who give you a trial period to test their offerings. You can always opt for them.

Not just that. Many service providers only take payment once they achieve their goal.

So, do look out for such service providers if you’re having a tough time paying upfront.

Myth #9: Hotels under construction shouldn’t consider revenue management

Your hotel is still under construction? No worries, you can still opt for revenue management.

Many hoteliers wait for their hotel to start operations and then go for services like revenue management. However, that shouldn’t be the case. 

A hotel needs to be prepared from day one. And this is exactly what revenue management helps you with.

While the property is still in construction, you can leverage it to learn about the market segment, sales strategies, carry out compset analysis, work on pricing research and processing, and forward planning of market demand cycles.

Do you see how prepared you’re going to be when you cut that ribbon?

Not to mention, if there are provisions, you can actually make changes to your hotel rooms as per what you have analysed.