How To Audit Hotel Revenue

How To Audit Hotel Revenue: 9 Important Steps To Follow

Background: Why Audit Your Hotel Revenue? 

Before explaining how to audit hotel revenue, it’s important to understand why we do it. To develop effective revenue management strategies, we must start by gathering and analysing all of the available information. That is where your hotel revenue audit comes in. 

Revenue management is the heart of the hospitality business and ensures we all work in successful businesses which benefit our customers, colleagues and communities. As Revenue Managers, our challenge is to optimise all revenue streams. That means taking a holistic approach and making sure everyone in the business supports revenue management. 

We believe in moving away from spreadsheets and short-term targets. Instead, we use software, data and business intelligence to predict what is going to happen in the future — then develop strategies to achieve long-term business goals

Overview: How Does A Revenue Management Audit Work? 

A hotel revenue management audit doesn’t just review data from within your business. It looks at your customers, competitors and partners too. By understanding the big picture, we can identify all areas for improvement and all opportunities to grow. This work is fundamental to building your hotel revenue management strategy. 

Our hotel revenue management audits generally take between 1-2 full days. We spend this time with you on-site to get hands-on with your business and meet the people involved. 

We typically work most closely with your Revenue Manager (if you have one). However, it is also important for your General Manager and Sales & Marketing Manager to be involved. The audit covers the whole business, and we want to ensure all departments embrace a revenue management culture.   

Through a thorough and methodical process, we analyse all factors which influence your current revenue performance. Once the research and reviews are complete, we provide a weighted score out of 100 based on the findings of the audit. This provides a clear understanding of your biggest opportunities and the most important areas for you to address.  

Revenue Management Strategy

Process: How To Audit Hotel Revenue 

Business Practices

We start our hotel revenue audit by looking at your people and processes. Our goal is to gauge the overall understanding and appetite for revenue management. We review your internal resources, your team’s current data and recording processes, and their willingness to embrace new technology. 

This process provides us with background and context so that we can tailor recommendations to your specific needs. It allows us to identify and resolve potential roadblocks early on. And it starts the internal communication required to explain the process and gain support for the project.  

Measurement & KPIs

Rather than just reviewing how you are performing against your current KPIs, we take a step back and look at which metrics you should be measuring. 

In the past, we used to look at simply setting the price and increasing RevPAR. Today Revenue Managers must be more focused on the long-term strategy and take a holistic approach to drive total revenue.

It is, therefore, important to understand how different revenue streams are performing. That might mean expanding your KPIs to include metrics such as Net Revenue Per Available Room, Gross Operating Profit Per Available Room, and Conference & Banqueting Revenue Per Available Square Metre for example. 

Technology Review 

We believe that the most successful hotels in the future will be those who take full advantage of software and technology.  

We research different systems on the market, such as property management, revenue management and channel management systems. These systems provide artificial intelligence working 24/7 to analyse data and automatically set the best prices for your hotel rooms. It is just not possible for humans to replicate this work as quickly and accurately, offering you a real competitive advantage.

However, we don’t think of this technology as a replacement for Revenue Managers. Instead, the more significant benefit actually comes from the systems freeing up Revenue Managers to focus on strategic initiatives, which deliver greater benefits for your hotel in the long run.

There are lots of different software solutions available, and it can be challenging to know which is right for you. We believe the key to success is simplicity, ensuring the tools help rather than hinder your staff. 

Market Segmentation 

We help you track the right your market segmentation to provide insight into your customers’ needs, behaviour and budgets. 

This segmentation helps you identify who is visiting your hotel and the exact nature of their stay. It reviews the channels they are using to research and book their trips, as well as their lead times and booking processes. It also looks into the revenue, cancellation and no-show rates for the different groups. 

By understanding your most valuable customers and channels, you can develop targeted marketing campaigns and dynamic pricing strategies which maximise your return on investment.

Hotel Revenue Management

Competitive Analysis 

After looking at your customers, the next step in the hotel revenue audit to study your competitors. To develop an effective revenue management strategy, we must understand how you compare against your direct and indirect competition. 

We conduct a SWOT analysis to assess rival hotels. By comparing their strengths and weaknesses with pricing models, we can create Rate Value Assessment. This allows us to position your hotel in a matrix with your closest competitors, showing how you compare against their attributes and respective rates. 

For your indirect competition, we take a macro view of changing national and global trends. Are business accounts turning to Airbnb for staff accommodation? Are customers booking fewer cruises because of climate concerns? This piece of work helps to identify less obvious opportunities and threats.  

Distribution 

Your distribution channels are a vital part of your revenue management strategy.

With massive reach, social proof and huge marketing budgets, OTAs are a very powerful way to promote your hotel. However, when taking commission and costs into account, your Net RevPar can drastically reduce from these indirect bookings. 

We identify the best mix of channels and develop a distribution strategy which supports your revenue management goals. Furthermore, we also evaluate your options for channel management software, which is vital to control your prices and availability across channels. 

Inventory Management 

Inventory management is intrinsically linked with distribution. In this stage, we review your out of order and out of service rooms, your yield restrictions and length of stay.

We also review and recommend revenue management software. These tools analyse your past reservation data to forecast occupancy levels and room rates. This allows you to make adjustments in anticipation of peaks and troughs in demand. By integrating your RMS with your channel manager, we help ensure optimal occupancy and rates across all channels. 

Financial Review 

Not the most glamorous step of how to audit hotel revenue, but arguably the most important. We conduct in-depth financial reviews of your month-end reports and review key metrics, including: 

  • Net Revenue Per Available Room
  • Total Revenue Per Available Room
  • Total Revenue Per Client – TRevPEC
  • Gross Operating Profit Per Available Room – GOPPAR
  • Conference & Banqueting Revenue Per Available Square Metre – RevPAM

The financial review is vital for developing an evidence-based revenue management strategy. 

Pricing Strategies

The final piece in the audit puzzle is to review your pricing strategies. 

We review your pricing against all available demand, supply, external and internal data that we’ve collected. External data comes from our Competitive Analysis work, while internal data comes from the Market Segmentation and Financial Review. 

We then build out pricing strategies designed to maximise your Total RevPar and GOPPAR. These pricing strategies can be cost or value-based, and customer or competitor-driven. They also include recommendations for negotiated corporate rates and groups, as well as opportunities for cross-selling and upselling. 

Hotel Revenue Audit

Next Steps: Developing Your Revenue Management Strategy

This audit is a meticulous process which gathers and analyses a huge amount of data. However, we are aware that the data alone is not enough. 

With that in mind, we provide a weighted score out of 100 based on the findings of the audit. This score identifies your biggest opportunities and outlines the priority areas to address. We also provide personalised recommendations and tactics based on our expertise and experience with similar properties.

The hotel revenue audit gives you a roadmap to develop your revenue management strategy and embed the culture within your organisation. We are, of course, more than happy to offer ongoing support to help you achieve this. 

For more information about how a Hotel Revenue Management Audit can benefit your business, please book a free 30-minute consultation today.

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