Put More Heads in Beds, For Less

#Revenue Management

Revenue Management Tricks of the Trade

Revenue Management: Is it an art or a science?  We at INNsight like to believe revenue management is just as much an art as it is a science.  We recommend clients leverage big data to make scientific calls on rate setting while also keeping a pulse on customer feedback and social signals to really exact pricing based on more intangible factors—the art of revenue management.

Before we even dive into Revenue Management Tricks, let’s first define key metrics and terminology that every Hotel Revenue Manager should be familiar with:

Revenue per Available Room (RevPAR): Total Room Revenue/Available Rooms for Rent.  RevPAR is a performance metric that signals the revenue you are extracting from your real estate.  The higher the RevPAR, or Revenue per Key as typically denoted by industry insiders, the higher the value of your investment. RevPAR is a unit measure of real estate performance.

RevPAR can be most easily calculated by multiplying Average Daily Rate (ADR) by Occupancy Rate (OccRate)

Average Daily Rate (ADR): Room Revenue per date (range)/Total Rooms Rented per date (range).  ADR provides a measure of how much revenue you are averaging per room sold.   ADR is strictly a pricing metric.

Occupancy Rate (OccRate): Total Rooms Rented per date (range)/Available Rooms for Rent.  Occupancy Rate details the utilization of your room inventory.   Say: ‘Heads in Beds’ and you are talking about occupancy.

RevPAR, ADR, and OccRate are highly dependent metrics as their components make up the numerator or denominator of one another.  For example, if your Occupancy Rate is 100%, then your Revenue per Available Room is equal to your Average Daily Rate.  Ever heard the old adage: “If you are running 100% occupancy, then you aren’t charging enough?”  Well, that’s true if your ADR is equal to your RevPAR you are most likely not utilizing your property to its fullest extent and you are leaving some money on the table.

Room Nights per Stay: Room Nights per Stay gives you an average of how many nights a guest stays at your property.  You want to drive more multi-night stays to increase your utilization and decrease your cost per room as stay overs are cheaper to service than checkouts.

It costs money to operate a hotel.  The more rooms you sell, the more staff and supplies you need, the more electricity, water, and other variable costs simply go up.  Your goal as a hotelier is to optimize your revenue.  Drive good revenue, keep costs down, and utilize your real estate efficiently and the value of your property and business go up.  Identifying good revenue and whether your rate setting is optimized and you are not leaving money on the table requires data and a knack.

The INNsight.com platform has been created to display signals in demand and historical pricing data to help INNkeepers use data and demand factors to gauge rate setting to maximize Revenue per Available Room.

Some tricks of the trade to help optimize rates:


The scientific part of rate setting and revenue management requires data.  Big Data.  We recommend to our hotelier friends to maintain heaps of data about their historical sales.  We have built in daily, monthly, and annual sales reports with charting in our Property Management System to help INNkeepers look back at their data.  You can even download the reports into Excel to manipulate the data and glean insights.  The best way to set rates is looking back at Year-over-Year (YoY) figures.  We call them YoYo’s because yes they can go up and down, but if you are good with data, you can see patterns emerge and identify what base rate to set.  If you know what your rates were for previous year’s dates, your margin of error in defining this year’s rate is greatly reduced.


Check the competition to see where their rates are.  You can’t compare apples to oranges especially since no two properties are alike and all room types are different, but look for a proxy in your geography that you can use as a barometer for your rates.  Check the lay of the land.  Does a property in your region have similar makeup and clientele?  If so, check out their rate sampling by performing a Google search for hotels in your area or going onto one of the OTA sites and use that as a proxy for your rates.  Landscaping is most useful as you get closer to day to day pricing movements.  Even strolling around town or simply calling fellow hotels to gauge their inventory can help you price more competitively.  We don’t advise getting into rate wars with others.  Instead, we say focus on your property itself.  Deliver an awesome product and service and engage customers with INNsight.com’s Digital Marketing Tools.

The INNsight 5s and 9s Rule

Our 5s and 9s Pricing Rule takes into account the art of pricing optics to maximize sales while reflecting value to the customer without sacrificing margins.  5s and 9s is a simple rule.

Since INNsight does not engage in price fixing behavior in a way that the major OTAs influence, we recommend that INNkeepers take advantage of the lower commission rates on INNsight and discount their rates compare to drive more bookings towards their lower margin channel.  A technique to employ is to mark rates to end with a 9 on higher cost channels and to end rates with 5 on INNsight.  For example, higher cost channels should have rates trailing in 9 such as $109 while you manage your website to have rates trailing in 5 such as $105.  That $4 discount will certainly provide the pricing optics of a discount and drive lookers to book on your lower cost channel.

You can further employ the 5s and 9s rule in discounting.  Hoteliers feel that they need to discount their rates in increments of 10 but by doing that, you are leaving money on the table and losing a lot of revenue.  If you discount from a 9 to a 5, you are provided another decrement point while sacrificing less revenue.  For example, if a guest is walking out and your original rate was $99, simply discount by $4 to $95 before you decrement to $89.

This pricing tactic employs what is considering pricing optics.  Most retailers always price with a trailing nine to make the price appear lower than the digital pricing.  For example, $99 certainly is more marketable than $100.

You can further use pricing optics to optimize revenue by adding cents to your rates.  While tricky to account for all of the rounding errors, pennies do add up.  $99.99 anyone?

Fill the Gaps

Fill Gaps in Occupancy with Promotions!

We have built in our Property Management System a Graphical Room Inventory Display or GRID which shows you visually your property’s inventory and occupancy dynamics.  From this GRID, you can easily see the gaps which need to be filled on any date.  Search or scroll through any date the GRID displays your property’s inventory map with reservations, check-ins, checkouts, blocked rooms all displayed in an easy to read graphical layout.  To fill gaps in occupancy, you need to manage your inventory more effectively and leverage pricing techniques to drive sales.  Fortunately, INNsight provides various pricing and promotion tools to drive occupancy:


We have created an awesome hotel marketing and pricing tool called Markdown Manager which allows you to discount your rooms for a percentage or fixed price discount depending on stay rules.  Use Markdown Manager and offer discounts to drive multi-night stays and increase your Nights per Stay metric and Occupancy Rate.  When you set a markdown, your deals are broadcast on INNsight.com and displayed to guests with strike-thru pricing providing the immediate satisfaction that they are finding the lowest rates around.


INNsight allows you to discount rooms based on different eligibilities such as AAA, Senior, or Military Discounts.  You can actually define your own discount codes and terms of eligibility using INNsight’s powerful selling tools.  Using Discounts can drive your Occupancy Rate by lowering your Average Daily Rate.

Promo Codes

We have built the ability to offer Promotion Codes that you can define in our PMS and provide to guests online or offline to use when booking on INNsight.com or your website Powered by INNsight.  We recommend using Promotion Codes to drive return business.  When satisfied guests check out, perhaps offer them a Guest Review Card with a Promo Code which suggests them to leave you an online review and provides a promotion code to input when booking their next stay with you.  You can even offer Promo Codes online in your tweets or on Foursquare.  INNsight.com Promotion Codes are a powerful way to provide unique discounts to lookers and turn them into bookers.

Drive Group Sales

A sure-fire way to drive occupancy is to drive group sales.  Depending on your property size and type, group sales can offer a great way to fill in gaps in your inventory. Generally, group sales compromise ADR for Occupancy, but it is a sure fire way to ensure you are putting heads in beds.  INNsight.com offers a group booking form which sends any requests for more than 6+ rooms directly to your email inbox.

Use INNsight

The best trick to revenue management is a shameless promotion: Use INNsight.  We have built the tools, processes, and services to help you drive sales through the INNsight platform, which is the lowest cost channel to sell hotel rooms on the internet.  If you use INNsight you’ll help drive traffic to a platform which offers the lowest cost of acquisition and thereby increase your margins.  Why pay upwards of 30% in commission just to put heads in beds.  If you leverage INNsight, you can start driving more traffic and more sales with commissions lower than 10% saving you thousands per year in margin erosion.  Contact us to learn more and let INNsight Power your Place to Stay.

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