Revenue management for small hotels

Where a small hotel loses money on price

Most small hotels set a rate per season, perhaps a weekend supplement, and change it when something obviously happens. It feels safe, and it leaves money on the table in two directions at once:

• Busy nights sold too cheap. A trade fair or a concert fills the town. Your rooms sell weeks ahead at the normal rate, and the guests who would have paid more book elsewhere later.
• Quiet nights left empty. A Tuesday in low season stays at the same rate until the day before, when it is too late for a lower price to bring anyone in.

With 20 rooms, each night is a big share of your inventory. Two rooms sold well or badly is a 10% swing for that night.

Why doing it by hand stops working

Pricing well by hand means looking at every night ahead, every day: how many rooms are left, how fast the date is filling, what is happening in town. For one room type over the next 90 nights that is already 90 decisions. With three room types over a year it is more than a thousand, and they change every time a booking comes in.

Nobody running a small hotel has that time. So the review happens once a week, or once a month, or when a night looks strange. The nights in between are priced by default.

When an RMS is worth it

It is usually worth it when most of these are true:

• Your demand changes noticeably between weekdays and weekends, or across the season.
• Your town has events, fairs or holidays that fill hotels.
• Some nights sell out early while others stay empty.
• You do not have time to review prices night by night every day.
• Your property system can receive rates automatically, so changes reach your booking channels without copying.

It is less useful for a hotel whose rooms are almost all sold through fixed contracts, or one with very flat, predictable demand all year.

What to expect in the first months

• Prices that move more than you are used to. Within your limits, but more often. Look at a few nights in the calendar to see why before judging.
• Higher rates on your busiest nights, earlier than you would have raised them yourself.
• Lower rates on nights that are behind, early enough to make a difference.
• Fewer evenings spent on rates. You check, adjust where you know better, and move on.

Judge it on RevPAR (revenue per available room) over a full season compared with the same season before, not on a single night. One night priced higher that did not sell is not a failure if the month earned more.

How to start without a revenue manager

1. Set your limits first. Give each room type a floor you would never go below and a ceiling you would never go above. This is the most important decision, and it stays yours.
2. Keep your special dates out. Contract rates, group blocks and anything you want to price yourself.
3. Start with the room types that matter most. You do not have to switch on everything on day one.
4. Read the reasons. For the first few weeks, open a handful of nights and check that the reasons match what you know about your town.
5. Override when you know better. A good system takes your price as information, not as an error.

For the general picture, read what a hotel revenue management system does.