Revenue management and marketing in hotels

I had an interesting discussion with one of my hotel colleagues yesterday about the role of revenue management and marketing in the hotel industry. There is a crossover between the 2 functions that causes confusion. And, people tend to forget that the revenue management function focuses solely on prices.

If we use the basic 4Ps in marketing as a context behind this discussion, revenue management plays on 1 P which is pricing. Any hotels that place major focus on this function (say 70%+), they cannot avoid competing in a discount game. The Online Travel Agents (OTAs) role makes it even difficult for hotels. This is because OTAs is like a big shopping centre that has all shops selling the same thing (in consumer’s mind). When there are too many choices and it’s not clear on product propositions, prices drop.

What the marketing role can do in this environment? A lot but it takes times. There are the other 3 Ps that marketing can focus on. Most importantly, the marketing function for hotels should provide the answer to this question – Why would customers/guests choose to stay at your hotel (not the hotel next door)? The right answer we look for is ‘value’. This is because value is a sum of what the hotel could offer to guess (prices, experience, service, etc.)

My point is it requires a 50:50 balance and partnership between these 2 functions for a long term success for hotels. Focusing too much on revenue management for a long period of time put hotels at risk of relying too much on OTAs and the discount game. Focusing to much on marketing put hotels at risk of missing a near-term revenue.


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