Marjorie Theisen and Simone Puorto explain the basic of Revenue Management: What is RM? The 4 leverages: 1. Rate 2. Inventory 3. Distribution 4. Demand Reputation, pick-ups, nesting, spoilage and spillage, etc.

1. account managers training
REVENUE MANAGEMENT
BASIC STRATEGIES
#WIHPAcademy
marjorie theisen & simone puorto

2. #WIHPACADEMY
What is Revenue Management?
Revenue Management is the evolution of Yeld
Management: a variable pricing strategy, based on
understanding, anticipating and influencing consumer
behavior in order to maximize revenue or profits from a
fixed, perishable resource.
Yeld Management was introduced by American Arilines
at the end of the 70's.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT

3. #WIHPACADEMY
What is Revenue Management?
D.I.N.A.M.O.
Dynamic
Inventory
Optimization &
Maintenance
Optimizer
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT

4. #WIHPACADEMY
What is Revenue Management?
According to legend, Robert Crandall (CEO of A.A. in
the 70’s) spoke to his friend John Marriott about Yeld
Management.
Marriott was impressed and started using the system in
the famous hotel chain.
Since “yield” was a specific airline term, Marriott
renamed it “Revenue Management”.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT

5. #WIHPACADEMY
What is Revenue Management?
Main RM leverage is “price discrimination”
(customers consuming the same good/service at the same time but at different prices)
and can be applied with success to any perishable
resource (airplane seats, hotel rooms, concert tickets, etc.)
Thanks to the Airline Deregulation Act of 1978
(that basically removed government restriction in terms
of air ticket rates and created a competitive market in
airline business) this strategy became extremely
important for airline companies to stay competitive.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT

6. #WIHPACADEMY
Up in the Air
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1978 Airline Deregulation
Tickets Price Went Down
(-40% compared to 1978)
Volume Went Up
(+300% compared to 1978)

7. #WIHPACADEMY
THE 4 LEVERS
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
Rate
Defined according to the
market and profitability
Inventory
Avoid over/under-selling by
giving inventory smartly
Demand
Marketing actions generate
demand and thus price
Distribution
Distribute through channels
according to their customers
1. Rate 2. Inventory 3. Distribution 4. Demand

8. #WIHPACADEMY
Key Definitions
Fixed Cost:
The costs that do not change with the increase
or decrease of occupancy rate.
Fixed costs are mortgages, loans, taxes, employee
salaries, rent, insurances, internet landline, electricity
bills, etc. These costs do not increase with more rooms
but do not decrease either. This cost can be calculated
on the financial yearly statement
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

9. #WIHPACADEMY
Key Definitions
Variable Costs:
The costs directly related to hotel occupancy.
As occupancy increases, they increase; as
hotel occupancy decreases, they decrease as
well.
Variable costs are laundry, food and beverage, guest
room amenities, telephone calls, externalized
cleaning/waiter staff
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

10. #WIHPACADEMY
Key Definitions
RevPAR:
Revenue per Available Room
Calculated by taking into account the total room
revenue divided by the number of rooms you
have available to sell during the same time
period.
ADR x Occupation Rate
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

11. #WIHPACADEMY
Key Definitions
N-RevPAR:
Net Revenue per Available Room
Calculated by taking the room revenue, minus
commissions, travel agent fees and other sales
costs.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

12. #WIHPACADEMY
Key Definitions
Bottom Rate:
Rate under which it’s not profitable to sell.
<(Variable Costs + VAT + Distribution Costs)>
÷ Rooms
+ minimum profit margin (max: 20%)
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

13. #WIHPACADEMY
Demand Curve
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
€.0
€20.0
€40.0
€60.0
€80.0
€100.0
€120.0
€140.0

14. #WIHPACADEMY
Key Definitions
PICKUP:
Pickup is the speed with which reservations are
made over a certain period of time.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
April May June July ...
April 85% 75% 60% 35% ...
May - 90% 65% 50% ...
June - - 85% 55% ...
July - - - 75% ...
... ... ... ... ... ...

15. #WIHPACADEMY
Key Definitions
Spillage:
When a hotel sells it’s rooms too quickly and
has to close availability. This usually happens
when the rate strategy is not adapted to Pick-up
or when a hotel gave too many rooms in
allotments to Tour Operators or OTAs.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

16. #WIHPACADEMY
Key Definitions
Spoilage:
This is when a hotel has too many unsold
rooms and has to sell them at a too low price.
The danger with spoilage is that you can get re-
bookings of guests thus losing revenue and
rate.
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand

17. #WIHPACADEMY
Forecast
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
BASIC FORECAST
Date Booked Rooms Available Rooms Occupancy ADR RevPar Revenue Special Event Double Triple Suite
01/04/15 12 50 24% €123 €30 €1.476 €129 €149 €127
02/04/15 30 50 60% €123 €74 €3.691 €129 €149 €127
03/04/15 25 50 50% €162 €81 €4.055 €179 €179 €169
04/04/15 44 50 88% €172 €151 €7.560 €179 €179 €186
05/04/15 50 50 100% €172 €172 €8.598 Easter €149 €149 €212
06/04/15 51 50 102% €125 €128 €6.386 Easter €129 €149 €127
07/04/15 26 50 52% €116 €60 €3.018 €129 €149 €127
08/04/15 36 50 72% €123 €88 €4.411 €129 €149 €127
09/04/15 43 50 86% €107 €92 €4.604 €129 €149 €127
10/04/15 23 50 46% €111 €51 €2.546 €179 €179 €152
11/04/15 43 50 86% €146 €126 €6.280 €179 €179 €152
12/04/15 22 50 44% €119 €52 €2.617 €149 €149 €127
13/04/15 16 50 32% €122 €39 €1.950 €129 €149 €127
14/04/15 47 50 94% €112 €105 €5.274 €129 €149 €127
15/04/15 50 50 100% €104 €104 €5.179 €129 €149 €127
16/04/15 50 50 100% €112 €112 €5.588 €129 €149 €127
17/04/15 53 50 106% €122 €129 €6.464 Expo €179 €179 €152
18/04/15 53 50 106% €119 €126 €6.286 Expo €179 €179 €152
19/04/15 44 50 88% €117 €103 €5.163 €149 €149 €152
20/04/15 50 50 100% €106 €106 €5.324 €129 €149 €127
21/04/15 51 50 102% €111 €113 €5.646 Depeche Mode Concert €129 €149 €127
22/04/15 26 50 52% €113 €59 €2.946 €129 €149 €178
23/04/15 36 50 72% €161 €116 €5.792 €129 €149 €178
24/04/15 43 50 86% €165 €142 €7.109 €179 €179 €178
25/04/15 23 50 46% €139 €64 €3.194 €179 €179 €152
26/04/15 43 50 86% €136 €117 €5.862 €149 €149 €152
27/04/15 22 50 44% €114 €50 €2.503 €129 €149 €127
28/04/15 16 50 32% €106 €34 €1.695 €129 €149 €127
29/04/15 23 50 46% €129 €59 €2.967 €129 €149 €135
30/04/15 43 50 86% €150 €129 €6.462 €129 €149 €195

18. #WIHPACADEMY
Study the Distributors Booking Window
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
120
Days
90
Days
60
Days
Less than
30 Days
Arrival
Groups M.I.C.E Tour Operators OTAs and Direct

19. #WIHPACADEMY
Study the Distributors Booking Window
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
90
Days
60
Days
Less than
30 Days
Arrival
USA China Italy & Europe

20. #WIHPACADEMY
Business or Leisure?
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
Business Traveller Leisure Traveller
Not price-sensitive Very price-sensitive
Book flat corporate rates Book the best deal
Date-sensitive Not date-sensitive
Location-sensitive Can chance destination if he finds better
value for money
Travels all year
(except weekends and holidays)
Mostly travels during
week-ends and holidays
Limited demand Theorically unlimited demand

21. #WIHPACADEMY
Same Room, Same Day, Different Rate
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
102% PRICE DIFFERENCE!
• € 99,00 - OTA
• € 95,00 - FACEBOOK:
• € 90,00 - WALK-IN (morning)
• € 89,00 – TRIPADVISOR
• € 75,00 – RETURNING GUEST
• € 65,00 - GROUPON
• € 49,00 - WALK-IN (late evening)

22. #WIHPACADEMYWIHPHOTELS.COM
hotel
guest
wholesaler
tour operator
agent
119€
reseller reseller
115€ 99 € 99 €
OTA website
85 € 89 €
RATE PARITY
1. Rate 2. Inventory 3. Distribution 4. Demand
BASICS OF REVENUE MANAGEMENT

23. #WIHPACADEMYWIHPHOTELS.COM
hotel
guest 119€ 115€ 99 € 99 € 85 € 89 €
RATE PARITY
website
1. Rate 2. Inventory 3. Distribution 4. Demand
BASICS OF REVENUE MANAGEMENT

24. #WIHPACADEMY
Reputation
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
+Reputation = +Revenue
According to a Cornell University Study
if a hotel increases its reputation by 1%
it can increase RevPAR by 1.42%

25. #WIHPACADEMY
Reputation
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
+Reputation = +Bookings
87% of travellers reads review sites
to plan their holidays
TripAdvisor has 260 millions visitors/month
=
220 millions potential customer

26. #WIHPACADEMY
Marketing generates the demand
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
1. Rate 2. Inventory 3. Distribution 4. Demand
- Advertising
- Bloggers
- PR
- Social Media
- Billboard effect
- Renovations and upgrades
- Staff training
and more

27. #WIHPACADEMY
THE 4 LEVERS
WIHPHOTELS.COM
BASICS OF REVENUE MANAGEMENT
Rate
Defined according to the
market and profitability
Inventory
Avoid over/under-selling by
giving inventory smartly
Demand
Marketing actions generate
demand and thus price
Distribution
Distribute through channels
according to their customers

28. 5 REMINDERS FOR REVENUE MGMT
WIHPHOTELS.COM #WIHPACADEMY
1. Use all 4 levers, not just 1
The four levers are: Rates, Inventory,
Distribution and Demand.
2. RevPAR is the Key, not ADR
ADR is good for your ego, but will not pay
your bills!
3. Study data, don’t worship it
The easiest way to increase rates is to
increase service and guest satisfaction;
because you can’t move the hotel nor
renovate it over-night.
THE 4 PILLARS OF HOTEL MARKETING
4. Take a look around
You may not be interested in the
upcoming GaudiExhibition but your
guests are!
5. Unsold rooms means
you did it wrong
Don’t get obsessed with the cost of
occupied room and remember that
the cost of a unsold room is always
higher!

29. Basic and Effective Rate Strategy
WIHPHOTELS.COM #WIHPACADEMY
Early Bird
(up to 60 days prior arrival):
-20% Not Refundable
Early Booking
(from 59 to 30 days prior arrival):
-15% Not Refundable
Book Now Pay Now!
(from 29 to 7 days prior arrival):
-10% Not Refundable
THE 4 PILLARS OF HOTEL MARKETING
Last Minute
(from 6 to 2 days prior arrival):
-5 % Not Refundable
BAR – No Discount / Flexible
(free of charge cancellations up to 48
hours prior arrival. No show or late
cancellations: One night penalty)
3 Night PKG -10% / Flexible
5 Night PKG -15% / Flexible

30. Q&A