Why do we only apply revenue management where there is a bed?

Revenue management has long been synonymous with managing room rates and maximising occupancy, but this focus has become limiting in a world where hotels generate a significant portion of their revenue outside the guest room. Today, hotels need to move beyond the traditional model of managing room revenue and apply sophisticated strategies across all revenue streams—whether it’s food and beverage (f&b), spa services, meeting spaces, or even parking.

the case for total revenue management

historically, about 68% of a hotel’s revenue comes from room sales, while the remaining 32% comes from ancillary services such as f&b, spa facilities, meeting rooms, and other amenities. However, focusing solely on room revenue means missing critical opportunities to increase profitability. The concept of total revenue management is about expanding rm to these ancillary areas, optimising pricing, and demand across the entire property.

For instance, f&b, although a significant contributor, often operates with tighter margins due to high labour costs, especially in full-service hotels. applying rm principles—such as dynamic pricing based on time or guest segment—to restaurants, banqueting, or room service can help increase revenue. Likewise, spas and wellness centres can benefit from yield management by offering discounted treatments during low-demand periods to fill capacity.

Profit opportunities beyond the room

to illustrate the potential for rm beyond the room, let’s consider meeting and event spaces. These spaces are often underutilised, particularly during weekdays or off-peak seasons. by using rm strategies like dynamic pricing, hotels can better optimise the use of these areas. For example, during high-demand periods, hotels can increase the price for premium spaces and offer discounts or packages during slower periods to maximise occupancy and profitability.

Furthermore, measuring revenue per square foot in function spaces, rather than just focusing on the number of events, can provide a more accurate picture of profitability. metrics like space utilisation and revenue per attendee help hoteliers make better decisions about how to price and allocate these spaces to maximise returns.

Technology and data-driven insights

The rise of technology and automation in rm has made it easier to extend these strategies beyond rooms. advanced rm systems now integrate data from across the entire hotel, allowing managers to forecast demand more accurately for f&b, spas, and even parking spaces. For instance, real-time data can be used to adjust pricing for parking based on demand during city events or peak travel seasons.

Integration allows for a more seamless approach where total revenue per available room (trevpar) or gross operating profit per available room (GOPPAR) become critical metrics. these metrics give a more holistic view of a hotel's profitability by factoring in revenues from all departments.

Case study: Dynamic pricing in F&B

A real-world example of applying rm outside the bedroom is in f&b operations. Some hotels are now using dynamic pricing for their restaurants, adjusting meal prices based on demand, availability of tables, and special events. This mirrors the airline industry’s practice of adjusting ticket prices based on seat availability and time until departure.

For instance, a hotel may increase the price of its weekend brunch during peak tourist seasons but offer weekday deals to attract local residents during off-peak times. Similarly, offering bundled packages (e.g., a spa treatment with dinner at a discounted rate) during slow periods can drive additional revenue.

hallenges in implementation

While the concept of total rm is promising, it isn’t without challenges. One of the primary hurdles is operational integration. for rm to work across departments, there must be seamless communication and collaboration between f&b managers, event coordinators, spa managers, and other departments. each department must be aligned with the overall pricing and revenue strategies to ensure consistent and effective execution.

In addition, having the right technological infrastructure is crucial. Many hotels still rely on separate systems for each department, which can make it difficult to apply unified rm strategies. the key is to adopt integrated solutions that can analyse and forecast demand across the entire property, allowing for dynamic adjustments in pricing across all revenue streams.

Conclusion: revenue management for the entire hotel = Total Revenue Management

Applying Revenue Management strategies across all hotel departments—rooms, f&b, meeting spaces, and beyond—hotels can unlock new revenue streams, optimise demand, and improve profitability. The future of rm lies in a holistic approach that maximises returns on every square metre of a property, ensuring that no revenue opportunity is left untapped.

For hotels looking to stay competitive, adopting total revenue management strategies is not just a luxury—it’s a necessity.