Revenue Management Strategies and Performance of 5-Star Hotels in the Nairobi Metropolitan Area, Kenya

Abstract

The hotel industry in Kenya, particularly in the Nairobi Metropolitan Area, operates in a competitive, demand-sensitive environment where effective revenue management is vital to survival and profitability. However, despite their global application, many 5-star hotels in Nairobi continue to struggle with underperformance. Against this backdrop, the purpose of this study was to evaluate the effect of revenue management strategies on the performance of 5-star hotels in the Nairobi Metropolitan Area, Kenya. The specific objectives of the study were: to examine the effect of pricing strategy on the performance of 5-star hotels in the Nairobi Metropolitan Area, Kenya; to assess the effect of demand forecasting on the performance of 5-star hotels in the Nairobi Metropolitan Area, Kenya; to investigate the effect of distribution channel management on the performance of 5-star hotels in the Nairobi Metropolitan Area, Kenya, and to evaluate the moderating effect of organizational factors on the relationship between revenue management strategies on the performance of 5-star hotels in the Nairobi Metropolitan Area, Kenya. Regression analysis confirmed that pricing strategy significantly predicted performance explaining 38.5% of variance (R²=0.385). Demand forecasting was also significant (p<0.05; R²=0.260). Distribution channel management contributed positively but explained a smaller share of variance (p<0.05; R²=0.185). Organizational factors demonstrated the strongest bivariate correlation with performance (r=0.643, p<0.05), particularly leadership support and innovation-driven culture. However, moderation analysis showed that organizational factors did not significantly strengthen the relationship between strategies and performance (β=-0.345, p=0.363), implying they function as independent performance enhancers rather than moderators. As such, hotel managers should intensify the adoption of sophisticated pricing techniques, strengthen investment in data analytics for forecasting, and balance OTA use with direct booking incentives to minimize costs. Interdepartmental collaboration and a culture of innovation should be fostered to enhance organizational alignment with revenue strategies. Policymakers and regulators are urged to support digital transformation through incentives, training, and industry benchmarking platforms. For scholars, future research should focus on cross-country comparisons and integration of emerging technologies such as artificial intelligence and blockchain in revenue management. To align with SDG 8 (Decent Work and Economic Growth) and SDG 9 (Industry, Innovation, and Infrastructure), hotels should scale up digital transformation, invest in AI-driven forecasting tools, and integrate sustainable pricing practices that balance profitability with affordability. Strengthening interdepartmental collaboration and cultivating innovation-driven cultures will improve efficiency, consistent with SDG 12 (Responsible Consumption and Production) thereby directly contributing to Africa’s Vision 2050, which aspires to a prosperous, globally competitive, and sustainable hospitality sector.