Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Chapter 6 Revenue Management

Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved

Chapter 6 Revenue Management


Chapter 6 Focus Points Review occupancy percentage and its

effectiveness Review average daily rate and its effectiveness Review RevPAR and its effectiveness Discuss history of revenue management Discuss use of revenue management Outline components of revenue management Demonstrate applications of revenue

management


Review Definition of Occupancy Percentage

Occupancy Percentage - reveals the success of a hotel’s staff in attracting guests to a particular property

Number of Rooms Sold x 100

Number of rooms available Double Occupancy Percentage – measure of a

hotel staff’s ability to attract more than one guest to a room; thus a higher room rate and additional income

Number of Guests – Number of Rooms Sold x 100

Number of Rooms Sold


Definition of Average Daily Rate ADR

Average Daily Rate (ADR) - A measure of the hotel’s staff efforts in selling available room rates

Total Room Sales

Number of Rooms Sold


Definition of RevPAR

RevPAR – ability of a hotel to produce income and how many dollars each room is producing.

Room RevenueNumber of Available Rooms

orHotel occupancy % x ADR


Discussion Question

Utility of Occupancy percentage, ADR, and RevPAR?


Discussion Question Answer

Used to project room revenuesDemonstrate how room revenue is

calculatedLeads into Revenue Management


History of Yield Management

Airline industry’s use of yield Management Deregulation of airlines in late 1970s “Take It or

Leave It” Certain periods, certain seats, certain flights…

Compare similarities of the airline industry and hotel industry

Volatile productDemand periods which places the producers in a

favorable position Indicate differences of the airline industry and

hotel industry in using yield managementHotel groups can spend large amounts of money

on-site for food and beverage


Use of Yield Management

Goals of yield management Maximize profit for guest room sales Maximize profit for hotel services

(food, beverage, and convention services)

Discuss yield management software example in chapter (p. 170-171) maxim® Revenue Management Solutions

(MaximRMS) RevenueDASHBOARD™

OPERA Revenue Management


Revenue Manager

Reports to general manager Works closely with marketing and sales

department Consults with front office manager Job duties – refer to job listing (p. 171)


Components of Revenue Management

Yield – the percentage of income that could be secured if 100% of available rooms are sold at their full rack rate (highest room rate posted for a room in a hotel)

Revenue Realized Number of Rooms Sold x Actual Rate

Revenue Potential Number of Rooms Available for Sale x Rack Rate Yield = Revenue Realized (# Rooms Sold x ADR)

Revenue Potential (# Rooms Available x Rack Rate)


Yield = Revenue Realized (# Rooms Sold x ADR) Revenue Potential (# Rooms Available x Rack Rate)

See p. 172 in text for demonstration of Yield formula

Compare and contrast the concepts of yield and occupancy percentage (refer to Tables 6-1) p. 172 and (6-2) p.173

Components of Revenue Management (cont’d.)


Optimal Occupancy and Optimal Rate

Optimal occupancy- Achieving 100% occupancy with room sales which will yield the highest room rate.

Optimal Rate - A room rate which approaches the rack rate.

Review scenario p. 173 to consider possibilities!


StrategiesDiscuss components and strategies to

employ when using yield Management (refer to Table 6-3) p. 174High demand for rooms = Maximize room

rates Low demand for rooms = Maximize room sales

Carol Verret’s comments on establishing target numbers sales, manipulation of rates in the electronic distribution channels as well as revenue drivers within the organization (central reservations, property-level reservations, and sales department, and web site) p. 174


Forecasting

Importance of daily accuracy in forecasting.


Block-Out Periods

Block-out periods - Tagging certain dates in a time period when rooms have to be sold at a certain rate and/or certain number of minimum room rental nights


Automated Systems and Procedures

Discuss the importance of using computers and standard operating procedures when using yield management

Discuss the importance of training to use a yield management system


Channel Management

Reservation Channels Central Reservations GDS Third-party reservation system Toll-free phone reservation Travel Agent

Managing the Channels Rebecca Oliver’s article – pp. 176-177

Advanced systems to manage central reservations offices and electronic reservation channels available

That now combines the maximization of yield with a revenue management system which is connected to a PMS


Feedback

Discuss the importance of feedback on turn-a-way business in a yield management system (refer to Table 6-4; p. 177) = “Dollars Lost”


Management Challenges In Using Revenue Management

Alienation of CustomersMinimum stay requirementsPrice gouging


Considerations for Food and Beverage Sales

Review Table 6-5 p.

178


Applications of Revenue Managementp. 179

Scenarios #1 –

Determine Yield

Scenario #2 – Homecoming Weekend

Scenario #3 – Governor’s Conference vs. Jazz Weekend

Documents

Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved Chapter 6 Revenue Management