2. Revenue Management
The concept of Revenue Management
Measuring Revenue
Elements of Revenue Management
The Revenue Manager
Using Revenue Management
Revenue Management Software
3.
4. Why Revenue Management Is a Better
Performance Measure
Precise measure of
performance than either
Occupancy Percentage or
Average Daily Rate
Evaluative tool allows to use
potential as against actual
revenue can be compared
Use of specialty application.
calculations can be performed
quickly & accurately
5. Concept of Revenue Management
Originated
Airline
Industry
Lodging
Car
rental
Cruise
line
Railroad
Touring
6. Flexibility of Revenue Management
Room rates could accurately be adjusted based
upon demand of specific market segments
Business
travelers
booking less
than seven
days prior to
arrival
Leisure
travelers
booking
three to six
months in
advance of
arrival
Members of
hotel’s
frequent
guest
program
Travelers
making
reservations
over Internet
Travelers
making
reservations
at hotel’s
website
Travelers
requiring car
rentals,
airline
reservations,
& other
components
of travel
package
7. Key to Successful Revenue
Management
To sell
right
product
Guestrooms,
banquets,
ancillary services
To right
customer
Business, leisure,
convention, or
government
guest
On right
day
Weekday,
weekend
For right
price
Rack rate,
corporate rate,
group rate,
government rate,
or discount rate
8. Revenue Management
Based on Supply & Demand, Prices tend to rise when demand exceeds supply,
which is why revenue management seeks to increase revenue by focusing on
high-profit bookings instead of high-volume bookings to high-profit bookings As a
result:
By increasing bookings on low-demand days & by selling
rooms at higher room rates on high-demand days, can
improve profitability
In general, room rates should be higher (in order to maximize
rate) when demand exceeds supply & lower (in order to
increase occupancy) when supply exceeds demand
9. Critical Importance of Forecasting
HMC, common problem fixed inventory of products & there is
no way to recover time & revenue lost
• Property they manage
• Competitive market in which operates
Managers need
reliable information to
base their forecasts
To consider future events—or variables—that might affect
business
10. Benefits of Revenue Management
Improved forecasting
Improved seasonal pricing & inventory decisions
Identification of new market segments
Identification of market segment demands
Enhanced coordination between FO & Sales
Determination of discounting activity
Improved development of short-term & long-term business plans
11. Challenges in Revenue Management
Different demand situations different tactics
Each day separate situation
Implement tactics suited to property
• Guest
• Market
• Demand conditions
12. Methods of Revenue Management
Capacity
Management
Discount
Allocation
Duration
Control
13. Methods of Revenue Management
Capacity Management
Controlling &
limiting room
supply
Selective
Overbooking
• Early
Checkouts
• Cancellations
• No Shows
• Walk-ins of day
Varies with
room type
Influenced
with
competitors
availability
Group
Attrition
• Group History
• Online
Shopping
• Business
Sourcing
14. Methods of Revenue Management
Discount Allocation
• Restricts time period
• Product mix (rooms)
• Protect remaining rooms & sell on high price
• Filling rooms otherwise remained unsold
• Encourage upselling
• Price Elastic
• Small increase in price/ Drop in demand
• Price Inelastic
• Small increase in price/ No effect
15. Methods of Revenue Management
Duration Control
Places time
constraints
on
accepting
reservations
Protect
rooms for
multi-day
reservations
Reject
single night
reservations
Resorts,
special days
16. Designed to measure achievement
Yield
Statistics
Actual Revenue
• Revenue from
rooms sold
Potential
• Revenue if all
rooms sold
17. Measuring Revenue
Formula 1: Potential average single rate
Formula 2: Potential average double rate
Formula 3: Multiple occupancy percentage
Formula 4: Rate spread
Formula 5: Potential average rate
Formula 6: Room rate achievement factor
Formula 7: Yield statistic
Formula 8: RevPAR
Formula 9: Identical yields
Formula 10: Equivalent occupancy
Formula 11: Required non-room revenue per guest
RevPAG & GOPPAR
18. Elements of Revenue Management
Group room sales
Transient room sales
Other revenue opportunities
Local & area-wide activities
Special events
19. Group Room Sales
Booking Data
Booking Pace
Anticipated Business
Lead Time
Displacement of Transient Business
20. Transient Room Sales
Rooms sold to non
group travelers
Booked closer to arrival
of group business
Transient Business 2-3
weeks
Revenue Management
Ethics
• Group Business 5-6 Months
• Resort Group 1-2 years
21. Other Revenue Opportunities
Non-Room Revenues
• Meetings, Banquets, Recreational & Spa
Total Package
• Rooms, Meals, Meetings, Rentals etc.
Focus on rooms & others mix
Collective Profitability from all departments
22. Local & Area-Wide Activities
Displacement of guest
• Convention
• Transient
• Smaller groups
Awareness of market and surroundings
• Activities
• Wedding
• Events
Cancellations at competitor creates a vacuum
Ethics & business practice
23. Special Events
Holidays, Concerts, Festivals & Sporting Events
Advantage from demand enhancing activity
Restricting Room Rate Discounts
Minimum length of stay
Be careful over alienate frequent travelers
24. Fair Market Share
Performance in
relation with the
competition
Rates being offered
are competitive
Hotel is getting a
fair share of
available business
26. Revenue Manager
Skills and Qualities
Operational skills
Analytical skills
Strategic skills
Organizing skills
Communications skills
Good listening skills
Team-building skills
Training skills
Patience
Creativity
Cooperativeness
Flexibility
27. The Revenue Meeting
Ongoing
process
High or Low
Occupancy
Part of Hotel’s
approach to
business
Regular &
appropriate
decisions
Opposite to
Short Term
Track trends &
guest demand,
months/years
before
Other
departments as
part of Team
Revenue
Management
Plan
28. Revenue Management Plan
No of Guest to
help F & B
preparations
Rate Changes &
Adaptations for
selling strategy
Occupancy
percentages for
Housekeeping &
so
Review forecast,
weekly/monthly
Review previous
data, week/month
Review booking
pace
Review old
business
Present new
business
Discuss last
minute
adjustments
Interdepartmental
communication
plan
30-60 Days
outlook
Current channel
distributions
Review 30-60-90-
120 days
Upcoming critical
periods
29. High-Demand Tactics
Close or restrict discounts
Apply minimum length of stay restrictions carefully
Reduce group room allocations
Reduce or eliminate 6 p.m. holds
Tighten guarantee & cancellation policies
Raise rates to be consistent with competitors
Consider rate raise for packages
30. Low-Demand Tactics
Sell value &
benefits
Offer
packages
Keep discount
categories
open
Encourage
upgrades
Offer stay-
sensitive price
incentives
Remove stay
restrictions
Involve your
staff
32. Revenue Strategy
Hurdle Rate
Set lowest rate for day
Rates below not applicable
Fluctuate day by day
Pricing strategy to maximize
revenue
Incentive based
Minimum Length Stay
Specified no
of nights
Even
occupancy
Peak period
High
Occupancy
Special
Event
Additional
business
Avoid losing
guest
33. Revenue Strategy
Close to arrival
Arrival date should be
before closing
Stay through high season
Additional arrivals on
date will not be accepted
Denial should be
recorded
Sell Through
Minimum length of
stay
Strategy to overbook
peak day
Focus no show, early
departure ,
cancellations
