Guide
What a hotel revenue management system does
A revenue management system, or RMS, decides what each of your rooms should cost on each night ahead, and keeps deciding as bookings come in. This guide explains what it reads, what it decides, what you should stay in charge of, and how to tell a useful one from a black box.
The short answer
Every night you sell is a separate product with an expiry date. A room left empty tonight is revenue you will never get back, and a room sold too cheaply three weeks before a sold-out weekend is revenue you gave away. Revenue management is the practice of pricing each night according to the demand for that night.
Done by hand, it means opening a spreadsheet or your property system every morning, looking at what has sold, and adjusting rates night by night. An RMS does the same reasoning automatically, for every room type and every night months ahead, and pushes the new rates to your property system and booking channels.
What an RMS reads
A pricing decision is only as good as the signals behind it. The ones that matter most for a hotel:
Availability
How many rooms of each type are still free for the night. When few are left, each one is worth more; when many are left close to the date, the price has to work harder to fill them.
Time to arrival
The same occupancy means different things 90 days out and 3 days out. A night half full three months ahead may be on track; half full three days ahead is behind.
Booking pace
How fast a night is filling compared with what is normal for it. A burst of bookings for one date is often the first sign of an event or a group you had not heard about.
Local events
Concerts, trade fairs, sporting events and holidays move demand for every hotel in town. A good RMS knows about them before the bookings arrive, not after.
Day of the week and season
The regular shape of your demand: weekend versus weekday, high season versus low. This is the baseline that everything else adjusts.
Your own decisions
When you override a price, you are telling the system something it did not know. A well-built RMS learns from that instead of fighting it.
Some systems also read competitors' published rates. They can be a useful sanity check, but your own bookings and availability say more about the demand for your rooms than another hotel's price does.
What it decides
From those signals, an RMS sets a rate for each room type and each night, usually starting from a base rate you already know and moving it up or down. Typical moves:
- Raising the rate when a night fills faster than usual, when only the last rooms are left, or when an event is in town.
- Lowering the rate when a night is behind its usual pace, or when arrival is close and rooms are still free.
- Holding the rate when nothing unusual is happening, so prices do not twitch for no reason.
- Restrictions such as minimum stays on peak nights, so a busy Saturday is not sold as a single night that blocks a longer booking.
It then repeats this on a schedule, because the right price for a night three weeks ahead is not the same today as it will be next Tuesday.
What you should keep control of
An RMS should take the repetitive work off your hands, not your judgement. Before you switch one on, make sure you can:
- Set a floor and a ceiling per room type. The system prices inside them, never outside.
- Override any night and have your price stand, without the system quietly putting its own back.
- Exclude dates you want to price yourself: a wedding block, a contract rate, a date you know something about.
- See why a price moved. "The algorithm decided" is not an answer you can check or explain to an owner.
The numbers it moves
Revenue management is judged on three figures. It helps to know which one a decision is protecting.
| Occupancy | Rooms sold divided by rooms available. High occupancy at a low price can still be a bad night. |
|---|---|
| ADR | Average daily rate: room revenue divided by rooms sold. What a sold room earned on average. |
| RevPAR | Revenue per available room: room revenue divided by rooms available, or occupancy × ADR. The figure that balances the other two, and the one most revenue managers watch. |
A pricing change that raises ADR but empties the hotel lowers RevPAR. A change that fills the hotel by giving rooms away does too. The point of an RMS is to find the price where RevPAR is best for each night.
How to choose one
- It connects to your property system directly. If you have to export and import rates, it will not be used every day.
- It explains its prices. You should be able to open any night and read what moved it.
- Your limits are hard limits. Floors and ceilings are never crossed, and your overrides are respected.
- It knows your town. Local events should be in its calendar before the bookings show up.
- It is sized for you. A 20-room hotel does not need the setup work of a 400-room chain. See RMS for small hotels.
- You can try it on your own data. A demo on a sample hotel tells you little; one on your own rooms and rates tells you a lot.
How Dynamic Pricing does it
Dynamic Pricing is a revenue management system for hotels on igloorooms. It reads your rooms, rates, inventory and bookings from igloorooms and writes new rates back, so there is nothing to export.
- Every room type you switch on is repriced for each of the next 365 nights, on a schedule.
- It reads availability, time to arrival, booking pace, local events, the day of the week and your own corrections.
- You set a floor and a ceiling per room type, and dates you keep for yourself.
- When you change a price in igloorooms, your price stands, and the engine adjusts its future suggestions toward yours.
- The price calendar shows every night with the reasons that moved it.
See your own hotel, priced.
A 30-minute call on your own rooms and rates, walking through the next three months night by night. No commitment.
Request a demo