Revenue Management: Understanding the basics for your campground.

At Team Outsider as campground owners and professional third-party campground managers, we are constantly looking for opportunities to improve the top-line (revenue) and bottom-line (net income) performance of our properties. One of the tools we use to achieve this is called revenue management.

In the camping, RV park, and outdoor hospitality market, discussion of revenue management has become increasingly prominent at conferences and conventions over the past few years. In this blog post, we will arm you with a bit of background information so that you can intelligently interpret and discuss the application of revenue management to your campground / RV park. In our next blog post, we talk about the specific measures you can take to apply these concepts at your property.

In this blog post, we will arm you with a bit of background information so that you can intelligently interpret and discuss the application of revenue management to your campground / RV park.

What is revenue management?

Revenue management (which is also referred to as yield management) is a set of revenue maximization strategies and tactics used to enhance the financial performance of businesses with perishable inventory (hotels, airlines, rental car companies, and campgrounds, to name a few). Revenue management focuses on selling the right site to the right guest at the right price at the right time through the right channel, and includes both strategic and tactical elements which we will discuss further below.

When did revenue management become a thing?

Originally called yield management, revenue management was developed in the mid-1980s by Robert L. Crandall who was the Chairman and CEO of American Airlines. (In today's world, the terms yield management and revenue management are used interchangeably.) In American Airlines' 1987 Annual Report, the company stated that the goal of yield management "is to maximize passenger revenue by selling the right seat to the right customer and at the right time."

What kind of businesses can benefit from revenue management?

Industries that use and can benefit from revenue management include airlines, hotels, cruise lines, car rental companies, and of course, campgrounds and RV parks. There are four key characteristics that, if present, allow for the successful application of revenue management:

You mentioned two types of revenue management: tactical and strategic. What are these and what's the difference between them?

What is tactical revenue management?
Tactical revenue management is the implementation of short-term (1 to 90 day) measures that support your strategic revenue management philosophy and longer-term revenue goals. Tactical revenue management tools include:

Forecasting: Estimating demand and availability of sites
Rate management: This includes short-term discounts as well as dynamic pricing (also referred to as demand-based pricing). Low-demand periods have lower prices and high demand periods have higher prices.
Duration Control: This includes minimum stay requirements, stay through requirements (must stay on a Saturday night), or changing rules as arrival dates approach.

What is strategic revenue management?

Strategic revenue management for your campground focuses on longer-term goals such as identifying and cultivating your desired target markets and identifying and promoting the factors that differentiate your campground from your competitors. Strategic revenue management considers the long-term aspects of market positioning and can be broken down into multiple categories, a few of which are detailed below:

Demand Generation: The objective of demand generation is to produce the most possible revenue under any supply/demand condition. Strategic revenue management goes beyond the management of existing demand to manipulate and increase demand. Demand can be generated through: brand affiliation, highlighting unique features, level of service, and location.
Marketing Strategies for Revenue Management: These strategies include segmenting your target market by various factors such as: geographic location, demographic, psychographic, behavioral traits, and price sensitivity. Other strategies include knowing who your best customers are and why.

What basic key performance indicators (KPIs) are relevant to campground revenue management?
Revenue management KPIs generally focus on four primary data points: revenue, occupancy, ADR, and RevPAR. Each of these is defined below.

1. Revenue: The total amount of sales generated from the sale of goods and services. Revenue is typically referred to as "top-line."

2. Occupancy: The proportion of campsites sold relative to total campsites available. This includes all site types; however, you can also evaluate your occupancy based on specific site types. For example, you will want to know the occupancy percentage for your RV sites as well as for your accommodations like deluxe cabins.

Occupancy Percentage = campsites occupied for a period / campsites available in that same period x 100

3. Average Daily Rate (ADR): The average rate you charge for your sites during a specific timeframe.

ADR = registration revenue / number of campsite nights sold

4. RevPAR: Revenue per available room is a common metric in the hotel industry. While occupancy percentage and ADR are both common performance measures, they are less useful when viewed in isolation. RevPAR provides context on the relationship between your campground's occupancy and ADR.

RevPAR = Rooms Revenue / Rooms Available or RevPAR = ADR x Occupancy

Is there anything else that I need to know?

Yes, this is just a quick introduction to campground revenue management. Our next post will be focused on the basics of applying revenue management to your campground or RV park. Remember, comprehensive revenue management has the potential to increase your revenue, profit, and ultimately the value of your investment.