Using demand management effectively

Demand Management, also called Revenue Management or Yield Management, is the matching of room prices to occupancy and demand. Most hotels practice demand management offline. (If you walk into a hotel on a Sunday night, you are quite likely to obtain a good price from the reception.) However, it is often done quite poorly online. Online Demand Management is important because potential customers can use the Internet to compare your rate with that of many other hotels in a few seconds.

1. Decide your 'base room rates'. Then decide how much you are willing to increase them or decrease them to suit demand. Here's an example of a strategy you might use:




Occupancy	Price Adjustment
Less than 25% full	Reduce base rate by 30%
25-50% full	Reduce base rate by 20%
50-75% full	Reduce base rate by 10%
75-100% full	Increase base rate by 10%




2. If your Booking Engine has a Demand Management Module, enter the agreed rate structure.



3. Define the time frame that you want to optimise rates in, i.e., 28 days.



4. At least once per week, check the hotel occupancy and optimise the room rates according to demand. (If your booking engine supports this feature, enter the hotel occupancy to have your rates automatically adjusted according to your pre-defined rate structure).



5. Define the dates when you may wish to fix rates, such as weddings and conferences. (If your Booking Engine allows, 'freeze' the rates on these dates to prevent them being adjusted).
6. Train hotel reservation staff to understand your rate structure.



7. Reduce rate confusion for your reception staff by training them to use their own website to obtain room rates for walk-in and phone enquiries, or by providing them weekly with an occupancy sheet to allow them to calculate rates.



8. To ensure you obtain the rewards from this effort, use one of the many Booking Engine Management tools on the market to ensure that all websites you are on receive your updated rates.

Tip: To encourage early booking, set the future rate at a low rate and increase it as the hotel fills up.