Revenue management playbook: Definition, strategies, and software


Dynamic pricing, also known as demand-based pricing, is a pricing strategy in which prices are adjusted to reflect real-time demand. For example, hotels and airlines often use dynamic pricing to increase prices during periods of high demand, such as holidays and major events. By closely looking at customer demand and tracking historical sales data, businesses can make informed decisions about pricing their products and services to maximize revenue. They can also improve customer satisfaction by ensuring they can meet customer demand as closely as possible. These kinds of businesses use revenue management because they typically have perishable inventory. This means that if they do not sell a product or service today, they cannot sell it tomorrow. It also means that they cannot sell too much of a product or service, or they will overbook and have to offer discounts to customers.

revenue management

For SaaS and other internet-reliant businesses, mobile is one of the single most essential revenue streams. Consequently, a company operating without prioritizing mobile optimization is at a competitive disadvantage. Optimizing your website for mobile means ensuring pages load quickly, display properly on different mobile devices, and the buttons are fully functional.

What is Hotel Revenue Management?

Simultaneously, contractual information about the billing schedules is sent to accounting. But services may get billed upon finishing the job, completing a certain percent of the work or hitting certain milestones. And if you sell digital goods subscriptions, these may be invoiced based on the number of users or usage data, like number of time-units used or transactions processed. And if a customer has multiple orders or changes between billing cycles, invoices need to be coordinated so your customers can clearly see what they’ve purchased. At this point, the invoices are sent by finance to the customer for payment, and eventually, payment is received and recorded by Accounting. This in turn, enables you to be more consistent across your channels, more customer-friendly, and more efficient.

Read more about revenue cycle management solutions here.

Revenue management is the strategic use of market data and analytics to predict customer behavior and optimize pricing and allocation of resources to increase business revenue and profit. The difference between Yield Management and Revenue Management is in the overall strategy, including in-depth analytics and forecasting. Yield management denotes the actual price optimization part – and revenue management goes way beyond in its complexity of different aspects, terms and techniques. Revenue management is very similar to the concept of yield management, though it is considered much broader with the ultimate goal of optimizing the sales of the room so that the hotel revenues are maximized. Since it delves deeper into the overall revenue of a hotel, instead of just the amount of turnover, it requires more detailed data analysis. Data and key performance indicators are used to come up with a future forecast. This forecast will not only involve room usage but other sales aspects of the hotel as well, such as revenue from restaurants and spas.

Data is growing at an exponential rate across organizations as businesses move to cloud infrastructure to store their information. The solution segment dominates the market with the largest revenue share over the forecast period.Based on components, the global market for revenue management is divided into solutions and services.

Using a revenue management system

Airlines use it to fill more seats during slow travel seasons by offering discounts. Ultimately, GESDeK II will contribute to the Government of Kenya’s goal to transition to a more efficient public sector that enables private sector driven economic growth.

It goes beyond simply establishing fixed prices and instead relies on real-time data, market demand, and various influencing factors to determine the optimal rates for hotel rooms. The goal is to find a balance between attracting guests with competitive pricing during periods of low demand and capitalizing on higher rates during peak demand periods. Market segmentation can be approached through various lenses, and some key avenues are demographic segmentation, psychographic factors, etc.

To capitalize on demand variations and client behavior, revenue management is commonly used in industries with fixed capacity and consumable goods or services, such as airlines, hotels, and rental companies. Businesses can use advanced data analysis, segmentation strategies, and dynamic pricing strategies to change their products and prices in real time to correspond with market conditions and client preferences. The global revenue management market is being driven by the demand for data-driven insights, cloud-based solutions, AI and machine learning technologies, and the need to remain competitive in the global market.

This is especially true in the hospitality and travel industries, where revenue management relies heavily on predictions about future demand. Capacity management is a measure of how much of a product or service a business can produce and sell. It’s often used to ensure businesses don’t overbook their products or services, which leads to lost revenue and dissatisfied customers. A classic revenue management technique is to set up a customer loyalty program. By encouraging customers to buy directly from the company, the firm can avoid selling to wholesalers and retailers at lower margins. This approach also allows the company to market directly to its end customers and interact with them, which may result in new ideas regarding how to better service customers.

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