Revenue Management – sales method by managing prices and occupancy of short-term rental apartments 20.09.2019

Revenue Management is a popular methodology of revenue management, but not only, in the hotel industry. It is also increasingly used for short-term rental of apartments. At RentPlanet we use it from the very beginning of our business.

What exactly is it and what are the benefits from the perspective of property owners?

RM, or Revenue Management, also called Yield Management, is not a concept as young as it may seem. It began to be used in the aviation industry to optimize the process of managing both revenues and human resources. Due to the effects of this approach, it was adopted by the hotel industry in the late 1980s for the needs of facility management and from that moment on it is constantly gaining popularity, adapting in parallel to market changes and the opportunities offered by new technologies. This is thus the basic and at the same time one of the most effective ways to determine the operational strategy of hotels or other entities that use RM.

What is Revenue Management in the apartment rental management industry?

Simply put, RM is a method of optimizing revenue from rented apartments. Based on the analysis of relevant data, it allows forecasting demand and supply, and thus enables optimizing the price for accommodation, which ultimately translates into generating higher income. RM can be simultaneously divided into three components. The first is the so-called RM Tactical, which in addition to what has already been mentioned, also refers to such issues as market segmentation or analysis of distribution channels. Another element is RM Financial, whose task is to provide a clear answer to the question, what exactly generates costs and what revenues? In addition to income from rental, other additional services, such as cleaning or the use of discounts or vouchers, which the manager provides to the guests of the apartment, can generate a profit. Perhaps it is a matter of an attractive catering offer that he can offer thanks to establishing cooperation with a nearby restaurant, or any other type of service that guests will use. The last component is RM Strategic, which allows you to specify the pricing policy, and in particular the key target group, the optimal price per night so that it is competitive and attractive to guests and provides an appropriate margin. RM Strategic also allows you to determine how the manager's offer compares with the competition and how the market situation looks like, etc.

A new and old approach to Revenue Management

Until recently, the basis of RM used in hotels (but not only) were the so-called mathematical forecasting theories that were essentially based on historical data. However, the modern market requires managers to have a more dynamic approach, which is reflected in modern RM methodology based on statistical regression models. This approach is known, among others brokers who observe changes on the stock exchange. In their case, it was necessary to analyze a comprehensive set of variables (updated on a regular basis), and then generate accurate and dynamic forecasts based on them. Dynamic, because it is conditioned by many factors that may have undergone significant modifications in a short period. The key result in this process is the so-called pricing, which is setting the optimal price on which the interest in the offer depends, and thus the occupancy of the apartment and finally obtained revenue. Thanks to this, modern and comprehensive Revenue Management takes into account not only historical data, but also the current market situation, which allows you to determine the pricing policy for a given location or individual property.

Proprietary Revenue Management methodology

It is worth bearing in mind, however, that publicly available information on how the model RM works and what the purpose of its use is - it is only one of the elements of the property manager's activities. The key aspect, however, is the individual approach, developed on the basis of experience, know-how and knowledge of analysts, thanks to which automated processes are deepened and improved, and RM itself is adapted to the nature of the business. It is worth mentioning here that in RentPlanet, when setting the price, we analyze over 150 factors in 24/7 mode that affect its amount, so it can change up to 4 times in one day, and this is only one of many elements our proprietary RM methodology. Our unique competences and knowledge mean that we are able to guarantee our partners an average annual occupancy rate of 74% (the result for all apartments managed by us, as in some regions it was even higher), and the annual revenue of up to 65,000 PLN for the property owner.

What does the owner gain thanks to cooperation with RentPlanet?

The way in which we manage the properties entrusted to us (including the proprietary approach of RM) is a key element of cooperation with our partners, determining its quality. The basis for the settlement is a commission system transparent to both parties. We make every effort to ensure that the apartments enjoy the greatest interest of guests throughout the year. Our knowledge and experience, including self-developed RM methods in this case play a significant role, having a direct impact on the income obtained from short-term rental.

Newsletter
This website uses COOKIES.

By browsing it you accept our cookies policy, according to your browser settings. Read more about Privacy Policy.

OK, close