The Fundamentals of Hotel Revenue Management

Hotel revenue management has been a staple part of running a successful hospitality business. With the continuous changes brought about by advanced hospitality tech, new consumer trends, and the global pandemic, more hoteliers are finding themselves at a loss for how to properly manage limited resources to increase revenue and profits. 

We consulted with Hospitality Innovators Inc. Corporate Director of Revenue Management Michelle Ann De Ramos-Lascano, MBA to provide her thoughts and views on practical hotel revenue management tips, hotel booking trends, and the future of hotel financing.

With over 14 years of experience in the hospitality industry, working with many distinguished hotels in the country like Pan Pacific Manila, Holiday Inn & Suites Makati, and the InterContinenal Hotels Group, De Ramos-Lascano has seen how hotel revenue management can transform into a dynamic pillar of the hospitality industry. 

Our three-part hotel revenue management series will cover the past, present, and future of the discipline and will serve as a comprehensive guide for hoteliers. It will cover the tried-and-tested principles of hotel revenue management, best practices to increase hotel bookings and RevPAR, how to adapt to consumer preferences, and what to expect in the coming years. 


The Guiding Principles of Hotel Revenue Management

While there have been significant changes in hotel revenue management, there are still irrefutable principles that remain relevant to today’s hospitality market. We sat down with Hospitality Innovators Inc. Corporate Director of Revenue Management Michelle Ann De Ramos-Lascano, MBA to take us through the guiding statutes of hotel revenue management. 


Is there a difference in how small and large hotels should approach hotel revenue management? Which principles would apply universally and which ones would change with scale of operations? 

[Hotel] Revenue Management’s guiding principle is basically selling the right product, to the right customer, for the right price, through the right channel, at the right time. This principle will not change regardless of the hotel scale of operation; however, approach may vary on hotel size. 

"[Hotel] Revenue Management’s guiding principle is basically selling the right product, to the right customer, for the right price, through the right channel, at the right time."

Product, Customer, and Price will definitely vary depending on hotel scale of operation while approach on distribution channel and proper timing would basically be the same. 

Factors that affect hotel revenue management: Scale-Dependent and Scale-Independent factors.


1. The range of hotel products and services available will always be in proportion to hotel scale. 

Small scale hotels would mostly have limited product offerings compared to larger ones. Thus, the approach in selling the product would be more specific to certain markets only. 

2. Larger-scale hotels will have more options in their “Best Available Rate” offerings. 

For room rate pricing, since small-scale hotels would have fewer products, the room rate range would be more limited compared to bigger hotels. The Best Available Rate is the range of room prices that offer the most value to customers at a particular point in time. Looking at the “BAR Tier,” it will be on a lesser bandwidth and less dynamic. 

3. Customer segmentation will vary depending on how many target demographics a hotel can accommodate. 

Customer saturation will highly depend on the variety of offerings that hotels have. Smaller scale hotels will have a more specific target market and their approach will be tailor-fit to specific types of travelers. Segmentation will also be more simple. 

4. Both large- and small-scale hotels can mix and match their distribution channels to maximize sales. 

When it comes to distribution channels, both large- and small-scale hotels can use a combination of multiple channels to reach their target markets. Most of these channels, whether OTAs or third-party websites, will not limit their partnership based on hotel sizes. In fact, they will be more than willing to capture as many partner hotels to maximize their revenue potentials.

5. External factors and market timing will always be an important factor in determining success for hotels, regardless of scale. 

Lastly, timing will also be a constant factor in hotel revenue management. It’s important that hoteliers are always aware of current market conditions and react accordingly to both internal and external factors affecting hotel performance. 


Should hotel revenue management be predictive or reactive? How can hotels find a balance to maximize revenue?  

It should be both predictive and reactive. When we say predictive, we are able to rely on historical data and trends to guide us with the proper strategies that we can apply based on the given data. Reactive means being on the lookout for current market movements and responding immediately to different market variables affecting demand to ensure application of appropriate strategies.

“[Hotel revenue management] should be both predictive and reactive.”

It is important hoteliers are able to find balance between these two, as that is the only way to come up with an appropriate approach in a given market situation and be able to apply revenue management at its fullest. In order to do this, they should always be aware of both internal and external factors affecting hotel performance, so we would know whether to give more weight on historical data (be predictive) or primarily consider present information (be reactive). 



What are the 5 unbreakable rules or principles in hotel revenue management? 

1. Best Flexible Rate is your market-appropriate rate.

A hotel’s Best Flexible Rate is the most attractive room rate with the least restrictions at the time of reservation. Providing the best flexible rates allows hoteliers to maximize their sales revenue and stay competitive. 

2. Create discount parameters for Best Flexible Rates.

To earn even more room sales, allow calculated discounts for your hotel’s best flexible rates. Customizing discount parameters prevents any losses while still producing more desirable revenue results.

3. Price rooms based on demand and compress rates to encourage buy-up.

Always be aware of market demand and what competitors are offering customers. Align your room rates with market standards and lessen room rate disparity to entice customers to purchase more profitable rooms. 

4. Consider the impact to all market segments when making pricing decisions.

When creating a pricing strategy, remember to take into account all segments of your hotel’s target market. What may seem attractive to one may be considered too expensive or less valuable to another. 

5. Rate description and restrictions must be clearly communicated to the customer.

Room rates will always be important to customers. Make sure to clearly communicate your competitive rates in all marketing materials and booking channels to ensure high awareness and information retention. 


Knowing the timeless fundamentals of hotel revenue management prepares hoteliers in adapting to changing market trends and customer behaviors. By understanding its principles, revenue managers can create strategic plans that successfully achieve each hotel’s goals and objectives. 

In our next blog, De-Ramos Lascano answers the most popular questions about hotel revenue management in the new age of travel and what hoteliers can do now to thrive in the hospitality landscape. 


Interested in maximizing your hotel’s revenue and improving overall performance? Work with ZEN Hospitality Solutions. We provide hotels with the latest hospitality technology designed to increase occupancy, maximize revenue, and streamline hotel operations. Talk to an expert today. 


Frequently Asked Questions About Hotel Revenue Management

What is hotel revenue management? 

Hotel revenue management is the practice of selling the right room to the right customer at the right price through the right channel at the right time. It’s a constant evaluation and adjustment of pricing strategies within a changing hospitality market. 

What are the variables to be considered in hotel revenue management? 

To create an effective hotel revenue management strategy, hoteliers need to consider several factors in their planning: Product, Pricing, Customer, Distribution Channels, and Timing. All must work together cohesively to maximize resources and produce the highest possible revenue. 

What are the rules of hotel revenue management? 

The 5 Unbreakable Rules of Hotel Revenue Management are:
1. Best Flexible Rate is your market-appropriate rate.
2. Create discount parameters for Best Flexible Rates.
3. Price rooms based on demand and compress rates to encourage buy-up.
4. Consider the impact to all market segments when making pricing decisions.
5. Clearly communicate rates and restrictions to customers.


Article by: Ayna Gonzales