Navigating the complexities of revenue management

Michael McCartan, VP of EMEA at IDeaS, explains why revenue management is becoming more important as the serviced apartment sector matures. 

Serviced apartments represent a small but rapidly expanding segment of the European hospitality industry, with the market projected to grow at a CAGR of 12.3 per cent from 2024 to 2030. This surge in demand is fueled by a ‘perfect storm’ of evolving travel preferences, regulatory shifts, and increased investment.

The demand for flexible extended-stay options is being driven by more travellers seeking accommodations that seamlessly integrate work and leisure. At the same time, regulatory crackdowns on short-term rentals like Airbnb in major cities have accelerated the need for professionally managed alternatives. Additionally, the sector’s lean operating model and strong financial performance have made it an increasingly attractive investment opportunity, generating rapid development and expansion across Europe.

In the United Kingdom alone, the market comprises over 56,700 serviced apartments, with England accounting for 87 per cent of this supply. This growth demonstrates the sector’s resilience and adaptability, as well as its ability to cater to diverse guest needs, from short stays to extended visits, for both business and leisure guests.

But in the race to scale up and adopt new tech, serviced apartment operators need to be considered with their choices. The rush to digitise can lead to clunky, mismatched systems that create more problems than they solve. Without a clear strategy, businesses could end up with tech that overcomplicates processes instead of making life easier for staff and guests. 

The integration of property management systems (PMS) and channel managers is essential for serviced apartment operators looking to streamline operations and minimise manual errors while enhancing the guest experience. The automation realised when adopting a PMS can be the defining factor between a poorly managed property and one that fosters guest satisfaction and repeat business.

Another area that automation can add real value to is revenue management. Managing pricing in serviced apartments is complex and more like a game of Tetris than the traditional daily rate adjustments in hotels. Unlike hotels, which primarily deal with short stays, aparthotels essentially operate as two hotels in one – one that is catering to long-stay guests and another for short-term stays. This makes forecasting demand and implementing optimal pricing and inventory decisions across different lengths of stay extremely challenging. Adding to this challenge, long stays often come with long booking windows, which makes displacement even more uncertain. The further out a booking is made, the harder it is to forecast with accuracy. 

Balancing the business mix is a fundamental part of running a successful serviced apartment business and directly impacts profitability. Too many long-stay bookings limit revenue opportunities, while too many short-stays can increase operational costs. Adopting the right technology will give operators an advantage, like being able to see the Tetris blocks before they appear. Automated, data-driven pricing tools can forecast demand, adjust rates in real time, and optimise inventory allocation based on length of stay. With average stays exceeding 30 days, compared to two or three for hotels, serviced apartment operators must shift to think beyond transient demand peaks and prepare for sustained occupancy.

Serviced apartment operators should also implement a strong marketing strategy that is informed by revenue management for attracting and retaining guests. The convergence of revenue management and marketing is increasingly becoming a critical focus for the hospitality industry as a whole, driven by the need to maximise profitability and avoid inefficiencies. When these two functions operate in silos, marketing campaigns can misalign with revenue goals—for example, promoting discounts for high-demand periods like Valentine’s Day, when the property would have filled up regardless. This disconnect not only wastes resources but undermines the potential for optimising underperforming periods. By aligning the two departments, operators can ensure campaigns are data-driven, targeted, and timed effectively to maximise returns and peak occupancy.

Diversifying revenue streams is another way to improve profitability for operators. Offering additional services such as laundry, transportation, and premium in-room amenities can enhance the overall guest experience while increasing revenue. Exploring corporate partnerships and long-term lease arrangements can also provide financial stability and broaden the customer base.

As the serviced apartment sector continues to grow and competition intensifies, operators must embrace innovation and adopt advanced technology to maintain a competitive edge. Those who invest in the right tools, align marketing with revenue management, and optimise their distribution strategies will be best positioned to thrive.