An Examination of Revenue Management in Relation to Hotels' Pricing StrategiesCenter for Hospitality Research Publications
AbstractMost hotels in the United States use revenue management, regardless of their pricing strategy relative to their competitive set. However, revenue management is executed more closely on average by hotels that price above their competitive set than by those who price below their competitive set. A study of over 6,000 hotels in all market segments found that virtually all hotels adjusted their rates in association with changes in occupancy. Although revenue management was nearly universal, hotels in certain market segments were less likely to adjust rates with occupancy and some simply did not do so. Mid-market hotels were heavily involved in revenue management, for instance, while many economy-segment properties apparently did not use this strategy. When the sample was divided according to pricing strategy, revenue management remained a nearly universal strategy. With regard to pricing strategy, some properties maintain their rates at a premium to those of their immediate competitors, while other hotels set room rates slightly below those of competitors (and others, much lower). Hotels that priced below competitors demonstrated strong use of revenue management, as did hotels that set their room rates above those of their competitors. The chief exception to the use of revenue management was certain groups of economy hotels. At the other end of the scale, luxury properties that price well below their competition constitute another group that does not seem to be applying revenue-management strategies.
Citation InformationEnz, C. A., & Canina, L. (2005). An examination of revenue management in relation to hotels' pricing strategies [Electronic article]. Cornell Hospitality Report, 5(6), 6-13.