Revenue management: the ever changing landscape and the need to innovate

Abstract

Purpose The purpose of this study is to explore the relationship between the real time requirements of guests and efforts made by hoteliers to optimize revenue and guest service excellence. Design/methodology/approach Prior studies have demonstrated the impact of room rates on profitability. The majority of these studies assumed an algebraic relationship between room rates and room demand to obtain the optimal solution by applying calculus to the revenue or profit function. This study adopts an alternative approach by seeking to better understanding the ever changing needs of hotel guests and how their behavior patterns have evolved over time together with innovative approaches that revenue managers need to adopt to optimize revenue. In today’s environment, revenue management has evolved into a more holistic approach and the study assimilates information from senior professionals from a range of hotels in India based on semi-structured interviews. Findings Revenue management is no longer about forecasting supply and demand based on historical data. This paper yields insights on emerging areas of importance for revenue management and advocates a systematic approach that hoteliers can adopt and apply to every department to secure a bigger impact on revenue management. Practical implications The findings can be used by hoteliers to fine-tune the room rates determined by conventional methods to arrive at a realistic and definitive value for optimal room rates. Originality/value This study highlights the issues that arise from viewing revenue management in isolation and it also considers innovative, customer-focused ways to optimize revenues.