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23 December 2013

Revenue Management has become a key strategic tool in the hospitality industry

In a recent interview with Hyatt Hotels & Resorts’ Vice President Revenue Management, Paul Murray, discovered that, over 2013, the practice of Revenue Management has become a key strategic tool in the hotel industry.

Being defined as the art and science of maximising revenue, the Revenue Management discipline manipulates prices in accordance with current and forecasted demand. Originating from the airline industry and its objective of maximising yield from the sale of seats, there has since been long-term growth in the use of Revenue Management within the hotel sector.

Such growth is thought to be the result of two main influencing factors; the first of which being the increase in the availability and sophistication of hotel management technology. Such technological advancements have enabled more complex demand forecasting and data processing, providing more detailed information on demand patterns, booking pace and market segmentation. The second factor is the rise in the number and use of different booking channels, particularly online travel agencies (OTAs) which have become an important tool in the booking process.

When implemented effectively, Revenue Management can yield strong financial returns in today’s competitive hotel industry. As well as assisting with the daily operation of hotels, Murray explained that Revenue Management supports the formulation of short-term and long-term strategies of an organisation. Through the provision of real-time information and more accurate forecasting, Revenue Management technology enables Hyatt to measure and forecast the internal performance of its hotel brands and to also identify opportunities in the external environment.

With hotels commonly offering services that extend well beyond the simple provision of a room, Murray proposed that the industry is benefiting from the selling and packaging of these ancillary services. By extending Revenue Management practices to give greater attention to guest spending on ancillary services, such as food and beverage offerings and conference and events space, hoteliers can better calculate the worth of each guest in terms of their expenditure, hence their revenue potential.

However, Murray warned of the risk of a misalignment between the technological and human aspect of Revenue Management practices. With the provision of considerable quantities of data, a revenue management team can easily become overwhelmed by and overly dependent on data. The challenge lies in supplementing the data with human processing in order to interpret its meaning and actively use it during decision making.

To overcome this challenge, Paul Murray emphasised the importance of effectively training employees, stating that “without a strong knowledge base combined with action-orientated information at the hotel level, many advances will quickly fall flat”.

arena4finance’s longstanding client, HOSPA, delivers an Education Training Programme in Revenue Management, which is the only course of its kind to be accredited by a British University, Oxford Brookes University. As HOSPA’s Head of Professional Development, arena4|finance’s Debra Adams worked in collaboration with Oxford Brookes University and hospitality revenue management professionals to produce the programme for HOSPA. Covering topics such as data analysis techniques, e-commerce and distribution channels, and pricing strategies, the course provides individuals with the skills and industry-specific knowledge required to become an effective revenue manager.

For further information on the course, please contact the HOSPA Education Team at or view further details on their website here.

The full interview between Paul Murray and can be read here.