What Is Revenue Management?
Revenue management, in hotels, is the discipline of optimizing availability and price to maximize revenue. Put simply, it means selling the right product to the right customer, at the right price, to increase revenue (Hotel Revenue Management Terminology (IDeaS)) (Revenue Management (INFORMS)).
Last updated: October 2026
How revenue management works
Revenue management started at American Airlines after US airline deregulation in 1978. In its fuller form, revenue management uses systems that decide automatically which product to sell, to which customer, at what price, where and when (Revenue Management (INFORMS)).
In a hotel, the work has five parts: competitive analysis, forecasting, pricing, inventory management and monitoring (Hotel revenue management, how-it-works guide). Hotels also brought a problem of their own: the length of a guest's stay. Industry folklore dates the hotel version to the late 1980s, when Marriott's team and consultants from Aeronomics identified a length-of-stay issue around Munich's Oktoberfest. Controlling length of stay became central to hotel revenue management (Revenue Management (INFORMS)).
Today much of the work runs through software. A revenue management system (RMS) is the system a business uses to control the supply and price of its inventory, managing availability, room types and stay patterns to reach maximum revenue or profit (Hotel Revenue Management Terminology (IDeaS)). Marriott says it uses revenue management systems, including proprietary ones, designed to support pricing decisions and optimize property-level revenue, and most hotels in its portfolio use web-based programs to set up and change rates (Marriott International Form 10-K, fiscal year 2025).
Results have traditionally been measured with occupancy, average daily rate (ADR) and RevPAR, and some hospitality businesses have moved on to GOPPAR and TRevPAR as well (Revenue Management Metrics Study (HSMAI APAC and Singapore Institute of Technology, 2019)).
Why revenue management matters for hotel distribution
American Airlines broke its yield management problem into overbooking, discount allocation and traffic management, estimated the benefit at $1.4 billion over the three years before 1992, and expected more than $500 million a year to continue (Yield Management at American Airlines (Interfaces, 1992)).
In hotel revenue management, much of the work is distribution. Inventory management decides how rooms are allocated across booking channels, setting the mix of direct bookings, OTA reservations and traditional travel agents to secure the highest-margin bookings at the lowest acquisition cost (Hotel revenue management, how-it-works guide).
In 2021, specialist software was the exception: Skift Research found that only 28% of hotels used RMS tools, and only 10% bought advanced revenue management technology once Expedia's limited free tools were left out (Hotels Still Slow to Adopt Revenue Management Tech (Skift Research, 2021)).
On Airbnb, hosts get a built-in tool. Smart Pricing uses hundreds of factors about a listing and its area to adjust the nightly price based on demand, within a price range the host sets and can change at any time (Use Smart Pricing to automatically adjust your prices based on demand (Airbnb Help Center)).
Revenue management compared with yield management, dynamic pricing and an RMS
| Revenue management | Yield management | Dynamic pricing | Revenue management system (RMS) | |
|---|---|---|---|---|
| What it is | The overall practice | The term American Airlines used for the practice (Interfaces paper, 1992) | Adjusting prices based on demand | Software that runs revenue management decisions |
| Works on | Price and availability | Overbooking, discount allocation and traffic management | Price only | A tool, not a practice |
Frequently asked questions
What is revenue management?
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Related terms
See all termsWhere Jetstream fits
Revenue management sets the price and availability of each room, and every channel a property sells through then has to show those decisions: OTAs, rental platforms and the property's own website. Each one needs the current rooms, rates and restrictions, kept up to date as prices change. Jetstream builds an AI channel manager that connects a property's systems to the channels where guests book and keeps inventory accurate on each one, managed from one place.