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Competencies for Revenue Management

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Presentation on theme: "Competencies for Revenue Management"— Presentation transcript:

0 Revenue Management

1 Competencies for Revenue Management
Explain the concept of revenue management, and discuss how managers can maximize revenue by using forecast information in capacity management, discount allocation, and duration control. Discuss common formulas managers use to measure and manage revenue. (continued)

2 Competencies for Revenue Management
(continued) Explain how revenue management decisions are affected by group room sales, transient room sales, other revenue opportunities, local and area-wide activities, special events, and fair market share forecasting. Discuss the revenue manager’s role and position, summarize typical revenue meetings, outline potential tactics to use in periods of high and low demand, discuss revenue management tactics, and explain how revenue management software helps hotel managers.

3 Benefits of Revenue Management
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 Determination of discounting activity (continued)

4 Benefits of Revenue Management
(continued) 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

5 Revenue Management Methods
Capacity management Balances risks of overbooking against potential loss of revenue from reservation cancellations, early departures, and no-shows Discount allocation Restricts time period and product mix (rooms) available at reduced or discounted rates Duration control Places time constraints on accepting reservations in order to protect rooms for multi-day reservations (which represent higher levels of revenue)

6 Revenue Management Formulas
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

7 Revenue Management Formulas
Formula 8: RevPAR Formula 9: Identical yields Formula 10: Equivalent occupancy Formula 11: Required non-room revenue per guest RevPAG GOPPAR

8 Potential Average Single Rate
Single Room Revenues at Rack Rate Number of Rooms Sold as Singles

9 Potential Average Double Rate
Double Room Revenues at Rack Rate Number of Rooms Sold as Doubles

10 Rate Spread Potential Average Double Rate  Potential Average Single Rate

11 Potential Average Rate
(Multiple Occupancy %  Rate Spread)  Potential Average Single Rate

12 Room Rate Achievement Factor
Actual Average Rate Potential Average Rate

13 Yield Statistic Formulas
Actual Rooms Revenue Potential Rooms Revenue Formula #2 Room Nights Sold Actual Average Room Rate Room Nights Available Potential Average Rate Formula #3 Occupancy Percentage  Room Rate Achievement Factor

14 RevPAR Formulas Formula #1 Actual Room Revenue Available Rooms Formula #2 Occupancy Percentage  Average Daily Rate

15 Identical Yield Occupancy Percentage = Current Occupancy Percentage 
Identical Yields Identical Yield Occupancy Percentage = Current Occupancy Percentage  Current Average Rate Proposed Average Rate

16 RevPAG and GOPPAR RevPAG = GOPPAR = Total Revenue Number of Guests
Departmental Revenues – Departmental Expenses Number of Available Rooms

17 Elements of Revenue Management Strategies
Group room sales Transient room sales Other revenue opportunities Local and area-wide activities Special events Fair market share forecasting

18 Revenue Manager Skills and Qualities
Operational skills Analytical skills Strategic skills Organizing skills Communications skills Good listening skills Team-building skills Team-building skills Training skills Patience Creativity Cooperativeness Flexibility

19 Revenue Management Meeting Participants
General manager Sales managers Catering managers Reservations manager Front office manager Food and beverage manager

20 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 and cancellation policies Raise rates to be consistent with competitors Consider a rate raise for packages Apply full price to suites and executive rooms Select dates that are to be closed-to-arrivals Evaluate the benefits of sell-throughs Apply deposits and guarantees to last night of stay

21 Low-Demand Tactics Sell value and benefits Offer packages
Keep discount categories open Encourage upgrades Offer stay-sensitive price incentives Remove stay restrictions Involve your staff Establish relationships with competitors Lower rates

22 Four Revenue Management Tactics
Hurdle rate Minimum length of stay Close to arrival Sell-through

23 Revenue Management Software
Revenue management software provides: Continuous monitoring Consistency Information availability Performance tracking Special reports

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