1. Tell me when you want to stay,
and I will tell you what to pay…
Tell me what you want to pay,
but then I tell you when to stay…

2. Revised definition…
Revenue Management is:
the art and science of optimising total contribution of an organisation’s multiple revenue streams by controlling price and availability of products in line with the strategic direction [and ambitions] of the organisation

3. The right product (=capacity)
Simply put…
The right product (=capacity)
To the right person
The goal of hotel revenue management can be summed up simply as follows: selling the right room to the right customer at the right price at the right time. On a playing field defined by duration and price, the game of hotel revenue management presents the challenge of maximizing revenue per available room.
What's the right room? Well, that room might have to do with what floor it's on, what kind of view it is, how large it is.
The right customer: maybe this is a customer from a particular market segment, maybe a customer from a business that we're after, or maybe it's a customer from a particular group, or maybe it's an individual customer. Think about loyalty!
The right price: this is going to depend on what the demand is like in the city at that time. Sometimes we might have lower prices available, sometimes maybe not.
And at the right time: when do we want them to come in and more importantly, when do they book?
Right place – Cornell only looks at 4 Ps. The fifth P is as important nowadays with rate parity, BAR and modern booking tools available for both the hotel and the guest/client.
For the right price
In the right period
At the right place (=distribution)

4. Relatively Fixed Capacity
Relatively Fixed Capacity: it is expensive or impractical to add or subtract inventory in the short run, though there may be some ability to shift it.
Airline example: the number of seats on a flight is fixed once schedules are set. Possibilities exist to expand on number of seats placed on an airplane , amount of business class seats through “moving curtain” and addition of another flight if a peak demand id identified.

5. Segmented Market with Predictable Demand per segment
Demand for the service can be divided into clear market segments and sensitivity to prices varies among the market segments.
Airline example: demand is segmented into business and leisure market segments using discount fare restrictions. Relatively price insensitive business travellers are charged higher fares than the more price sensitive leisure travellers, yet also receive more flexibility to make changes.

6. Perishable Inventory
There is a time dimension to the provision of the service – once that time has passed, the inventory loses all of its value: the inventory of capacity-constrained service firms can be thought of as time during which a unit of capacity is available.
Airline example: once a flight has departed, the unsold seat inventory has no value.

7. Appropriate Cost and Pricing Structure
Industries using yield management should possess a cost structure that features high fixed costs and fairly low variable costs. The cost of selling an additional unit of the existing capacity should be low relative to the price of the service. In addition, there should be a considerable flexibility to adjust prices quickly, to reflect variations in the balance of supply and demand. Thus an opportunity to evaluate and accept or reject order requests in advance of the performance of the service.
Airline example: the out-of-pocket cost of adding a passenger to a flight is very low. (Meals and servicing expenses of less than $10.)

8. Time Variable Demand
Time Variable Demand: There are definite peaks in demand, which can be predicted, but not with a high degree of certainty.
Airline example: passenger demand varies by season, day of the week, and time of day, and can be forecast by flight and fare category, but not precisely per month.
Seasonality is a matter of days, or even hours in cases of multiple departure times.

9. Convenience Factor (Willingness to pay)
From the customers point of view towards the product or service purchased inline with their own preference of consumption, convenience of accessibility and flexibility. Generally people are willing to pay more to suit their own convenience definition.
Airline example: passenger is willing to pay a premium for receiving flexibility of changing a flight within certain parameters or pay more for a flight that is departing when airport is reachable by public transport.

10. ??? ??? STRATEGIC TACTICAL OPERATIONAL Day of arrival Time > 1 YEAR
Stages in RM process…
???
???
STRATEGIC
> 1 YEAR
PRICINGS & OFFERINGS
POSITIONING
SEGMENTS
REVIEW OF MARKET
DISTRIBUTION PARTNERS
IMAGE & IDENTITY
TACTICAL
CURRENT YEAR
AGREE ON SET OF RULES
MARKET ANALYSIS
DEMAND PATTERN / CALENDAR
OPERATIONAL
WITHIN BOOKING CURVE
OPENING & CLOSING OF RATES
MONITOR AND ADJUST
Day of arrival
Time

11. STRATEGIC TACTICAL OPERATIONAL
Who is involved…
STRATEGIC
Executive team
Rev Mgr (if not already part)
TACTICAL
Revenue Mgr
Sales & Mkt
General Mgr
Operations
OPERATIONAL
Revenue Mgr
Sales & Mkt
General Mgr
Day of arrival
Time

12. WHAT HAPPENS TO THE REVPAR?
Recap…
100 bedroom hotel
50 rooms occupied
ADR €125
Room 51 is sold for €100…
WHAT HAPPENS TO THE REVPAR?

13. Revenue Per Available Room:
Old REVPAR…
Revenue Per Available Room:
Total room revenue
= € / $
Number of available rooms
100
(50 × 125)
100
6,250 =
= €62.50
Same amount of revenue divided by total number of rooms in the hotel.

14. Number of available rooms Total room revenue = € / $
New REVPAR…
Number of available rooms
Total room revenue
= € / $
100
(50 × 125) + 100
100
6,350 =
= € 63.50

15. The availability of rates…
Online reputation
Qualified/contracted
?????
Loyalty
Market segment
Competitor rates
Additional revenue
Rate
Number of rooms
Length of stay
Multiple levels of complexity…

16. Price Online Review Rating
Competitor mapping…
Hotel D
Price
Hotel G
Hotel A
Hotel B
Online
Review Rating
My Hotel
Hotel F
Hotel C
Hotel E
Hotel H

17. External data Internal data Capacity management Price optimization
Different focus and input…
External data
Capacity
management
Internal data
Price
optimization

18. DATA DATA DATA Different stages of RM… TECHNOLOGY ORGANIZATION
Culture
Communication
Responsibility & authority
Decision-making
Organizational structure
Processes and procedures
TECHNOLOGY
System integration
Revenue management system
Different stages of RM…
TACTICAL
Forecasting
STRATEGIC
Products and offerings
Targets and objectives
Market segmentation
Pricing
Distribution
PEOPLE
Revenue manager
background
Competences
Intuition
data analysis
DATA
data analysis
DATA
OPERATIONAL
Capacity management
Price optimization
Total revenue management
Profit optimization
Distribution
data analysis
DATA