As a travel business, practicing careful revenue management tactics can help you hit your financial targets and be profitable.
You might think this strategy is best applied to hotels and airlines. But, the truth is, many travel industry organizations, including tour operators, can use revenue management to maximize their profits and business growth.
To help you better understand revenue performance and how to apply it to your operation, we’ve put together a quick guide.
In the guide, we’ve included some expert insights from Kate Burda. Kate recently joined WeTravel for a webinar that covered creating demand for your tours in today's economy. She is the CEO & Founder of Kate Burda & Co, which specializes in revenue management and marketing for the luxury hospitality industry.
What Is Revenue Management In The Travel Industry?
Revenue management is all about using data to understand your clients’ behavior. In doing so, you can optimize your products and prices to match the demand better. The aim is to accelerate your sales and maximize growth.
A good example of revenue management in the travel industry is fluctuating flight prices. The prices change based on travelers’ search behavior and flight demand to display the optimal fare most likely to win bookings at that exact moment.
This strategy isn’t just suitable for airlines and large hotels, though. Any tour operator or business that offers inventory that expires or has a fixed capacity can benefit from dynamic pricing. By pitching your product at the right price and right time, your market is better primed to receive it.
To apply revenue management to your travel business, you need to have a system to collect and interpret consumer data. This is central to being able to generate insights and improve your forecasting.
As a result, you’ll be able to make smarter decisions around your pricing strategy.
Why Is Revenue Management Important For Your Business?
Meet Demand In Today’s Market
Why implement this pricing strategy into your business? That’s because if you apply it correctly, it’s a bridge to better meet your clients in today’s economy.
The 2020 global pandemic completely changed tourism and the customer buying journey. A major learning point from everything is that we now need to show up in front of our customers differently.
This includes shaping sales, marketing, and pricing modeling so that there’s no disparity between what you want to achieve and how you’re doing it.
In today’s climate, where COVID-19 is still impacting regions at different rates, it will be critical to be flexible and conscious of tourism demand.
Achieve A Better Financial Outcome
One of the main reasons to focus on revenue management is to help your business achieve its end-goal revenue strategy.
Kate shared some surprising stats during the webinar: as many as 90% of organizations fail to execute their revenue strategies, while 61% of organizations don’t have strategies in place that link to their financial outcomes.
Kate suggests that businesses can do more to think about what they’re trying to achieve and how their strategy ties to this. Being busy is not always enough to have a meaningful impact on your financial outcome. Instead, you should focus on bridging the gap between financial vision and execution.
Become More Customer-Centric
By diving into your business’s revenue performance, you take on a more customer-centric way of thinking. This is because you gain a far deeper understanding of their behaviors. You can then put their demands first when marketing, selling, and pricing your products.
Identify Gaps In The Market
Revenue management encourages flexibility, which can help you identify new gaps in the market.
Say you’re a tour operator and you decide to lower your prices during the quiet winter season. All of a sudden, you might discover a new influx of locals interested in your winter tours. Now you can open up your business to serve that market, giving you new avenues to explore in the industry.
Three Top Revenue Management Strategies To Focus On In Today’s Economy
1. Target The Right Customer Segments
One of the first steps to creating an effective revenue management strategy is understanding your different customer segments. Not all of your customers are the same. And not all segments will grow at the same rate or have the same opportunities available.
To do this, Kate suggests peeling away the products. Really get to know your different audiences and their behaviors, then work out which segments are primed to get you to your revenue goals.
You don’t need to target and optimize your strategy to suit all client segments. Just focus on core customers that will help you achieve your end goal.
2. Show Up Early In The Customer Journey With Marketing
Before the pandemic, travel demand was high. So, businesses could ride that wave and show up when travelers were validating their decisions or making a purchase.
Now, you need to show up with marketing before the traveler even knows what they want. Before price becomes one of the drivers and they weigh you up against competitors.
How do you capture them there? You own their mindset. If you understand their mindset, help them with insights, share valuable information, and guide them to make a really great decision early on, you stand a chance to get a share of the wallet too.
3. Stay Ahead Of Trends
Understanding what is happening in tourism today is key for forecasting demand.
At the moment, the situation is unpredictable with COVID. Travel isn’t as easy as it used to be--there is still red tape around movement and how businesses can operate, changing from one location to the next.
So, staying ahead of what is happening in a specific location can help you to more accurately identify where it’s safe to travel to and what activities will have the green light. In turn, you can adjust your strategy in a way that makes sense to the market and travelers.
Conclusion
Careful revenue management can have a significant impact on the success of your travel business. Whether starting new or refreshing your offering, applying this strategy can help you move more intentionally into the market as we emerge from COVID-19.
If you would like to connect with Kate, you can find her on LinkedIn or email her directly at kate@kateburda.com.
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