Revenue management experts typically recommend a cautious approach when selling rooms more than a year in advance. While there are various factors to consider, the overarching idea is to strike a balance between securing bookings and maximizing revenue. Here are key insights:
1. Cancellation Risk: Guests booking well in advance are more likely to cancel their reservations. This poses a potential risk to revenue, especially when flexible cancellation policies are in place.
2. Rate Flexibility: Selling too far ahead can limit a property's ability to adjust rates based on demand fluctuations and market conditions. Early rates may not reflect the optimal pricing for revenue maximization.
3. Market Dynamics: The hotel industry is dynamic, and long-term forecasts may not accurately predict future demand. Pricing and inventory decisions made too early may not align with actual market conditions.
4. Forecast Accuracy: Accurate demand forecasts are crucial for revenue management. Forecasting demand more than a year ahead can be challenging and less reliable.
5. Opportunity Costs: Devoting a significant portion of inventory to long-term bookings may mean missed short-term opportunities for higher-rated bookings, especially during peak seasons.
6. Rate Parity: Offering rates too far in advance could lead to rate parity issues, where a property consistently offers lower rates than competitors. This can impact a property's overall revenue potential.
As Pricepoint, we believe that for individual bookings and properties catering to individual guests, it's generally advisable to sell rooms for a maximum of the next 12 months. This approach allows properties to maintain rate flexibility, respond to changing market conditions, and optimize revenue while minimizing the risks associated with long-term bookings.