Why revenue management matters even in small hotels
Running a small hotel is a balancing act. You wear many hats such as host, accountant, marketer and operations manager, and revenue management often slips down the list of priorities. After all, without a dedicated revenue manager, the task may seem too technical or too time-consuming.
Here’s the truth: revenue management doesn’t have to be complex. With a few regular checks and simple adjustments, you can uncover new revenue opportunities, protect your margins, and make smarter decisions about your pricing and availability. These aren’t daily tasks, they’re occasional reviews, best done before the budgeting season or during quieter moments. Think of them as a health check for your hotel’s finances.
Having worked as a revenue manager myself, I know that small tweaks, when made at the right time, can have a big impact. Let’s walk through some practical tips that you can apply straight away.
1. Dig deeper into cancellation reasons
Every cancelled booking tells a story. But do you know what that story is?
Tracking cancellation reasons can reveal patterns that are easy to miss. For example, you might notice an increase in last-minute cancellations when competitors suddenly drop their prices. Or perhaps your cancellation policies are too strict, pushing guests towards more flexible alternatives.
By collecting and reviewing this data regularly, you’ll uncover valuable insights. Adjusting payment conditions or fine-tuning cancellation policies may help reduce unnecessary losses. Your property management system (PMS) can help here. Many systems, including Clock’s Property Management System+, provide reporting tools to track cancellation reasons and trends with ease.
2. Keep an eye on your pickup
Pickup is one of the simplest yet most powerful indicators of demand. It shows how many bookings are coming in over time, for each day in the future.
Monitoring pickup at least weekly, and ideally for the next 365 days, helps you spot early booking patterns. Are bookings for next summer slower than usual? Do school holidays or local events cause sudden increases? If you know the answer, you can react before it’s too late by adjusting prices, setting restrictions, or running targeted campaigns.
Tip: pay particular attention to “shoulder nights” - the nights before or after busy periods. Restricting shorter stays or adjusting availability can help you turn one busy weekend into a profitable full week.
3. Focus on repeat guests
Winning new guests is costly. Marketing, commissions, and advertising all add up. Encouraging repeat guests, on the other hand, is far cheaper and often more rewarding.
Ask yourself: what could make someone return? A direct booking discount? A complimentary breakfast for loyal guests? Even something as simple as a warm email invitation can strengthen the relationship.
To make these gestures work, be sure to capture guest email addresses (with permission) and keep in touch through a simple newsletter. Not every message needs to sell, sometimes it’s enough to share local news, events, or seasonal updates. The goal is to stay in mind, so when they plan their next trip, your hotel feels like the obvious choice.
4. Use restrictions wisely during high demand
Restrictions such as minimum stays or “closed to arrival” can help maximise revenue during peak demand. But they’re a double-edged sword: used carelessly, they may block otherwise profitable bookings.
Apply restrictions only when you’re confident demand is strong enough. For example, during a major local event, you might require a three-night minimum stay. This way, you avoid losing out on guests who would only stay one night and ensure you capture the most valuable bookings. Another straightforward use case: if Saturdays typically sell out first, set Saturday as “closed to arrival” so most bookings span Friday to Sunday rather than a single Saturday night.
Check your restrictions regularly and adapt them if the market changes. Flexibility is key: what works one year may not be right the next.
5. Think strategically about lead time
Lead time, meaning the number of days between booking and arrival, is one of the most powerful levers in revenue management. By tailoring your offers to different booking windows, you can shape demand, balance occupancy, and protect your revenue.
Consider offering:
- Early-bird rates for guests booking months in advance. These could come with a discount, paired with stricter cancellation terms and advance payment, to secure revenue early.
- Standard rates for bookings made weeks before arrival, with more flexible cancellation options or partial advance payments that reassure guests who are less certain about their plans.
- Premium last-minute rates for spontaneous travellers. Since these bookings usually come close to arrival, cancellation risk is lower, and you can confidently charge higher rates.
The trick is to adapt these strategies to your market. If a big event is coming up, you won’t need to discount early, as demand will take care of itself. Instead, keep your rates firm and use advance payments or stricter cancellation terms to protect your margins.
By combining lead-time pricing with tailored restrictions, you secure bookings early while also safeguarding revenue when demand peaks.
6. Review adult and child pricing
Families can be a valuable market, but pricing them fairly takes thought. Rather than applying a flat rate for all extra guests, consider flexible structures:
- Children under a certain age stay free.
- Older children pay a reduced rate.
- Family packages include meals or activities at a bundled price.
Upselling family-friendly extras, like children’s menus, extra beds, or local attraction tickets, can increase revenue without raising base prices. It’s about creating options that feel fair to guests while boosting your bottom line.
7. Benchmark your performance against competitors
Revenue management isn’t just about your own numbers. To see where you stand, compare your hotel against the local market. Three common indicators are:
- RGI (Revenue Generation Index): How well your hotel is performing in revenue compared to competitors.
- MPI (Market Penetration Index): How much market share you capture compared to others.
- ARI (Average Rate Index): How your average daily rate compares with the market.
Don’t worry if these sound technical. The point is simple: check if you’re ahead or falling behind. Then use the insight to adjust your strategy, whether that means more dynamic pricing, stronger marketing, or improved upselling.
8. Audit your sales channels
Your website and online travel agency (OTA) listings are your shop windows. Are they up to date? Do the photos reflect your current product? Are rates and packages consistent across channels?
Guests often browse several sites before booking. If they see outdated images or inconsistent information, they may lose trust and look elsewhere. Use quieter months to review and refresh your listings. A well-presented profile can be the difference between winning and losing a booking.
9. Move away from fixed surcharges
Fixed step-ups between room types look tidy, let’s say €20 extra for a Superior and €100 for a Suite, but they don’t move with demand. On low-demand dates, those gaps can feel too steep and slow upgrades; on high-demand days, they can be too narrow and give premium rooms away too cheaply.
A better approach is to flex the gap. When pace is slow, narrow the difference to make an upgrade an easy “yes.” When demand is high, widen it to reflect higher willingness to pay and protect premium rooms. For example: if your Standard room sells at €120, a quiet Tuesday might be Superior €130 / Suite €180; a peak summer Saturday might be Superior €155 / Suite €270.
Now, doing this across many dates and room types can be time-consuming if you manage it manually. If you’ve already put the basics in place and want to go further, this is where an RMS (revenue management system) earns its keep. It can look at booking pace and the room-type mix, then suggest or apply small changes to those gaps within the guardrails you set. You stay in control of the strategy; the system handles the repetition. If you’re on a PMS like Clock, set your room-type differentials as derived offsets and, with RMS integration, let the system make those nudges automatically while you focus on other priorities.
10. Don’t overlook ancillary revenues
Room revenue is just one piece of the puzzle. In many hotels, on-property outlets such as the bar, restaurant, and spa generate some of the highest-margin income. To tap into this potential, it’s important to go beyond overall figures and look at who is spending and where.
Ask yourself:
- Which guest segments spend the most on extras? For example, business travellers may value late check-outs, while leisure couples might book spa treatments or wine packages. Families may spend more on meals or parking.
- What services are most popular? Is breakfast consistently booked? Do weekend guests tend to upgrade to half-board? Are parking and shuttle services in demand for event periods?
- Can you design targeted offers to encourage more spending? A “business package” might include Wi-Fi upgrades and express laundry, while a “family package” could highlight meal deals and activity passes.
By segmenting ancillary revenue in this way, you can design packages and promotions that appeal to specific target groups, instead of taking a one-size-fits-all approach.
Analysing these patterns not only reveals hidden profit opportunities but also improves guest satisfaction. When guests feel that your offers are tailored to their needs, they are more likely to spend and more likely to return.
Regular revenue reviews make all the difference.
You don’t need a full-time revenue manager to benefit from revenue management. By reviewing cancellations, pickup, restrictions, lead times, and ancillary revenues, you’ll gain a clearer picture of your business and be able to make smart decisions.
Remember, these are not tasks to do every day. Think of them as seasonal check-ups - quick reviews that keep your hotel competitive and your revenue on track.
So here’s my challenge to you: when was the last time you checked your pickup or your cancellation reasons? If it’s been a while, take an hour this week to dive in. You may be surprised at what you find.
And if you’re ready to take your revenue management to the next level, stay tuned. In our next article, we’ll show how flexible rate structures in modern PMS tools like Clock’s Property Management System+, help small hotels react faster to market changes and make pricing smarter.
