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

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

3. 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
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4. 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
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Definition of RevPAR
RevPAR – ability of a hotel to produce income and how many dollars each room is producing.
Room Revenue
Number of Available Rooms or
Hotel occupancy % x ADR
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Discussion Question
Utility of Occupancy percentage, ADR, and RevPAR?
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7. Discussion Question Answer
Used to project room revenues
Demonstrate how room revenue is calculated
Leads into Revenue Management
Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved

8. 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 product
Demand periods which places the producers in a favorable position
Indicate differences of the airline industry and hotel industry in using yield management
Hotel groups can spend large amounts of money on-site for food and beverage
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9. 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 )
maxim® Revenue Management Solutions (MaximRMS)
RevenueDASHBOARD™
OPERA Revenue Management
Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved

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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)
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11. 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)
Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved

12. Components of Revenue Management (cont’d.)
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
Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved

13. 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!
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Strategies
Discuss components and strategies to employ when using yield Management (refer to Table 6-3) p. 174
High 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
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Forecasting
Importance of daily accuracy in forecasting.
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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
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17. 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
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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
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
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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”
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20. Management Challenges In Using Revenue Management
Alienation of Customers
Minimum stay requirements
Price gouging
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21. Considerations for Food and Beverage Sales
Review Table 6-5 p. 178
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22. Applications of Revenue Management p. 179
Scenarios #1 – Determine Yield
Scenario #2 – Homecoming Weekend
Scenario #3 – Governor’s Conference vs. Jazz Weekend
Copyright © 2007 by John Wiley & Sons, Inc. All rights reserved