Overcoming the Challenges of Revenue Management in Hostels

Hands up anyone, who knew what they wanted to do after leaving school?

Like most people I didn’t really know what to study or which career path to take but I knew I loved hotels.  So I decided to be a chef: how hard could it be, right..? 2 bags of onions, a bag of prawns, 1 bag of lemons and a shift that made my ankles ache…. aaand I knew this was definitely not for me.

I then got chucked into hotel reservations, which is where I discovered Revenue Management – something so complex and challenging that I could really sink my teeth into. I was content for a couple of years but after a while, if you know your market well, it became very repetitive and I felt I needed another challenge: I joined one of the fastest expanding hostel chains in Europe and it’s only then that my revenue management challenge (and I mean challenge) really begun!

What was once easy –  managing only room inventory – was now doubly as difficult: two sets of inventories, beds and rooms, both, in fact, selling the same space. It took me a while at first to wrap my head around it, but after a while I realised it was actually genius. A hotel sells a double room at £100, a hostel sells all the beds in a 6 bed dorm at £25 a bed, making £150 a room. It’s so clever, yet so simple. We were seeing average room rates better that some 3 or 4 star hotels I worked for!

My goal as a Hostel Revenue Manager was simple, maximize every bed, leave no bed unsold and get the best bed rate possible!

Enter my CHALLENGE!

A revenue manager’s role is like playing financial Tetris in that you are trying to smooth out your inventory, leave no inventory free across any bed category (this will ensure people get rates and availability returned when searching 4 or more nights), knowing when to sell a bed as a bed category, keep enough rooms for the groups department, group together bed bookings to ensure rooms stay on sale…the list goes on!

So how do you manage such complex algorithms to ensure you are on top of your game? Well, here I felt like what would have really helped is a PMS system that could cope with the complexities of how a hostel sells dual inventory.

Traditional Hotel PMS systems were built to manage one set of inventory known as room inventory; if you sell a room you subtract that from the total. Simple! No?

Well, in Hostels we have 2 sets of inventory, the room and the bed both with different totals. You sell a bed in a quad you subtract a bed and a room, leaving 3 beds and no rooms to sell. You sell the whole quad room you subtract 4 beds and 1 room, leaving 0 beds and 0 rooms to sell. (and so on…)

This is the biggest challenge, as traditional PMSs were never designed to cope with dual sets of inventory, which really is the same inventory. The PMS cannot make rational decisions on how to think, and can end up grouping individual bed reservations that have just come in to fill up a room, while multiple bed reservations can completely shut down your room availability.

If the PMS cannot figure out how best to optimise this spread, it opens an array of problems: inventory being sent incorrectly through the channel manager, people trying to book a multiple night stay will receive a message that the hostel is fully booked. Coupled with different categories, this all becomes a nightmare. You spend all day having the “Empty Bed Blues”.

It’s a horrible disease and soon consumes you. Watching your inventory like a hawk, frantically moving rooms and beds around to ensure you maximise your inventory, can make you feel like you need two brains instead of one just to cope – and let me tell you that that feeling will not even leave you on weekends!

So I asked myself why is it that something so simple is so hard to fix? Is it the lack of the industry’s concern for us mere hostels? Is it that challenging that nobody can actually solve the complexities that exist in managing beds and rooms in a PMS? So tell me what, what is the problem?

The answer, well its simple….we hostels have accepted PMSs as they are, we have accepted adaptations to Hotel PMSs to do the job we hostels need done! We sent a message to the hotel tech giants out there saying “We accept your half measures and your shabby modifications on your PMS systems in order to cope with some, but not all of our problems.” We have been prepared to do the manual work, which is odd when you think about it, because buying a PMS in the first place should alleviate all the manual manipulation.

I may not have known what I wanted to do when I left school but I did know that my love for the hospitality industry was not to work harder but work smarter. This is what excites me in Mews, where the foundations for hostels were built in, at the outset, making it uniquely positioned and ready to cater to any type of traveller. The possibilities with its 2-dimensional inventory management are truly endless.

Gregory Naidoo - Head of Sales