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R evenue management
Revenue management is a technique used in the hotel industry to optimize revenue from a fixed inventory of hotel rooms. It involves adjusting room rates and controlling room availability based on demand forecasts to maximize profits. Key aspects of revenue management include measuring yield, setting potential rates, and using metrics like occupancy percentage and room rate achievement factor. Applying revenue management strategies provides benefits like improved forecasting, identification of new markets, enhanced coordination, increased profits and savings.
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R evenue management
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- 2. The Concept ofRevenue Management Hotel Industry Applications Benefits of the techniques Areas where this concept is applied How the concept is applied Measuring Yield Yield statistic Potential Revenue Potential Average Single Rate Potential Average Double Rate Multiple Occupancy Percentage Rate Spread Potential Average Rate Room Rate Achievement Factor Identical Yields Equivalent Occupancy Benefits of Revenue Management
- 3. “Selling the rightproduct to the right customer at the right time for the right price.” -Robert G. Cross Aeronomics Revenue Management is the art and science of enhancing firm’s revenues while selling essentially the same amount of products or Revenue Management is a technique to optimize the revenue earned from a fixed, perishable resource.
- 4. Before its emergenceBOAC (now British Airways) experimented with differentiated fare products. The concept was pioneered by Robert Crandall CEO of American Airlines in the year 1985. First major users were American Airlines and Delta Airlines.
- 5. In 1990 itspread to other travel and transport companies, specially at national Car Rental. By the early 1990s the concept also began to influence television ad sales. The concept was first started in hotel by Bill Marriott, Jr, CEO of Marriott International in the 90s.
- 6. Fixed amount ofresources available for sale. The resources sold are perishable. Different customers are willing to pay a different price for using the same amount of resources.
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- 10. Regional Sales & MarketingManager Business Development Manager Asst. Business Development Manager Sales Coordinator Reservation & Revenue Executive Reservation & Revenue Associate
- 11. Yield Management isbased on Demand and Supply. The Hotel Industry’s Focus is shifting from High Volume Booking to High Profit Booking. THE CONCEPT OF YIELD MANAGEMENT
- 12. The Commodity thatthe Hotel sells is Time in a Given Space, and if it is Unsold, Revenue is lost forever. Yield Management is composed of a set of Demand Forecasting Techniques used to determine whether Room Rates should be raised or lowered, and whether a Reservation should be accepted or rejected in order to maximize Revenue. In order to maximize Revenue, the Front Office Manager needs to forecast Information concerning Capacity Management, Discount Allocation, and Duration Control.
- 13. It tries tosolve the following Problems: Controlling and limiting Room Supply Balancing the Risk of Overselling Guest Rooms with the Potential Loss of Rooms arising from Room Spoilage Determining how many Walk-ins to accept during the Day of Arrival, given projected cancellations, no- show and early departures.
- 14. Involves restricting the TimePeriod and Product Mix Available at reduced or discounted Rates, and limiting Discounts by Room Type through encouraging Upselling
- 15. Places time constraintson accepting reservations in order to protect sufficient space for multi-day requests.
- 17. Yield Statistic isthe Ratio of the Actual Revenue (Generated by the Number of Rooms Sold) to Potential Revenue (The Amount of Money that would be received from the Sales of Rooms in the Hotel at a Rack Rate)
- 18. Formula 1 Actual RoomsRevenue Potential Rooms Revenue OR Room Nights Sold × Actual Average Room Rate Room Nights Available Potential Average Rate OR Occupancy Percentage Room Rate Achievement Factor
- 19. It is themaximum revenue that could have been generated by a hotel in one day.
- 20. Formula 2: Single RoomRevenues at Rack Rate Number of Rooms Sold as Singles
- 21. Formula 3: Double RoomRevenues at Rack Rate Number of Rooms Sold as Doubles
- 22. Formula 4: Number ofRooms Occupied by more than 1 Person Total Number of Rooms Sold
- 23. Formula 5: Potential AverageDouble Rate Potential Average Single Rate
- 24. Formula 6: (Multiple Occupancy% Rate Spread) Potential Average Single Rate
- 25. Actual Average Rate PotentialAverage Rate Formula 7:
- 26. Formula 8: Identical YieldOccupancy Percentage = Current Occupancy Percentage Current Average Rate Proposed Average Rate
- 27. Formula 9: Equivalent Occupancy= Current Occupancy Percentage × −Marginal cost Equivalent Occupancy = Current Occupancy Percentage × Contribution Margin New Contribution Margin Rack Rate – Marginal Cost Rack Rate × (1- Discount Percentage)
- 28. Improved forecasting Improved seasonal pricing and inventory decisions Identification of new market segments Identification of market segment demands Enhanced coordination between the front office and sales divisions
- 29. Determination ofdiscounting activity Improved development of short-term and long- term business plans Establishment of a value-based rate structure Increased business and profits Savings in labor costs and other operating expenses Initiation of consistent guest-contact scripting