The Role of Revenue Management Practices and Building Resilience in Vietnamese Hotels

The hospitality industry is inherently vulnerable, often facing high levels of uncertainty and crises. Historical events—from the 9/11 attacks in 2001 to the COVID-19 pandemic—have highlighted the importance of effective hotel revenue management (RM) during downturns. As we continue to navigate aftershocks from recent health and economic crises, including the geopolitical upheaval caused by the conflict in Ukraine, it is paramount for hotels to adopt strategies that ensure financial sustainability, especially during periods of low demand.

Impact of Crises on Travel Demand

The COVID-19 pandemic has drastically altered international travel, prompting governments worldwide to enforce strict restrictions—such as border closures, quarantines, and the suspension of face-to-face services. As a result, international travel plummeted by 72% in 2020, marking the most challenging year for tourism on record. Compounding this, the current geopolitical climate, high inflation, and disrupted supply chains are expected to further dampen travel demand into 2025, with travelers prioritizing value and opting for shorter, closer trips. Nevertheless, in 2024, the Vietnamese tourism economy recovered back to 2019 levels.

Although RM practices are crucial for maximizing revenue, there remains a notable gap in understanding and implementation, particularly among independent hotels that lack the resources and knowledge commonly found in larger chains. To adapt to fluctuating demand, hoteliers must recognize the critical role of RM to not only survive but thrive during challenging times.

Understanding Revenue Management

Originating in the airline industry in the late 1970s, RM has since expanded into hospitality and various other sectors. Its core principles hinge on managing fixed capacity and perishable services, implementing dynamic pricing strategies, and effectively segmenting customers based on purchase intentions. The primary objective of RM is to maximize revenue by optimizing room sales—not merely by selling all available rooms or reducing rates, but by dynamically adjusting prices to reflect customer willingness to pay.

Effective RM leverages demand-based pricing and inventory management to optimize occupancy, taking into account various demand drivers, such as guest income, market conditions, and even macroeconomic factors. For hotels in Vietnam, understanding these demand influences is crucial to enhancing revenue, especially during low-demand periods.

Innovative Approaches to Revenue Management

Revenue Management encompasses a range of tools, including dynamic pricing and non-pricing methods or inventory control, and channel management. Recently, the integration of sustainability into RM practices has become increasingly essential. Simply relying on traditional RM strategies is insufficient for long-term competitive advantage. Successful hotels are now intertwining sustainability with revenue management processes, enhancing profitability while catering to a growing consumer demand for eco-friendly hospitality choices.

To navigate crises effectively, hotels should adopt a robust crisis management framework, characterized by flexibility and a proactive approach. The framework consists of six phases: prevention, immediate reaction, emergency response, restoration, long-term recovery, and resolution. These phases guide hotels in adapting their strategies based on situational demands and operational needs.

Shifting Strategies During Crises

Interestingly, hotels that frequently review and adjust their strategic plans tend to experience less negative impact from crises compared to those that do not. Instead of opting for drastic cost-cutting measures or price reductions, which can have long-term detrimental effects on Revenue per Available Room (RevPAR), hoteliers can explore supplementary offers, innovative marketing strategies, and loyalty programs.

The use of dynamic pricing and value-based pricing strategies should also be prioritized. As demand fluctuates, hotels can employ various techniques—such as bundled offerings, targeted discounts, and selective rate cuts—while still focusing on maintaining brand integrity and quality service.

COVID-19 illustrated the success of flexible booking conditions, additional revenue streams, and enhancing service offerings as effective RM tactics in crisis management. In Vietnam, hotel managers employed strategies aimed at domestic tourism, leveraged technology for contact reduction, and optimized cost structures, demonstrating a diverse application of RM practices.

Forward-Looking Considerations in Tourism

Post-pandemic tourism has re-emerged with vigor, bringing with it challenges like over-tourism, driven by an influx of eager travelers wanting to recover lost experiences. An effective RM strategy must balance this demand while maximizing a destination's sustainability—integrating profitability with community and environmental considerations to mitigate the risks of overloading local resources.

To strengthen financial sustainability, hotels must analyze various performance indicators, such as Gross Operating Profit per Available Room (GOPPAR), occupancy rates, and Average Daily Rate (ADR). By taking a comprehensive approach and employing diverse RM techniques—both pricing and non-pricing—hoteliers can optimize revenues while enhancing their operational resilience.

As Vietnam's tourism landscape evolves, commitment to best practices in RM will undoubtedly position hotels—whether independent or part of larger chains—for success in a post-crisis world. By prioritizing strategic planning, innovative practices, and an understanding of market dynamics, the hospitality industry can navigate uncertainties and emerge stronger than ever.