chapter 13 revenue management power point presentation

© 2005, Educational Institute

Chapter 13Revenue Management

Managing Front Office Operations

Seventh Edition

(333TXT or 333CIN)

2© 2005, Educational Institute

Competencies forRevenue Management

1. 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.

2. Discuss common formulas managers use to measure and manage revenue.

(continued)


Competencies forRevenue Management

3. Explain how revenue management decisions are affected by: group room sales, transient room sales, food and beverage activity, local and area-wide activities, special events, and fair market share forecasting.

4. Summarize typical revenue meetings, outline potential high and low demand tactics, discuss four revenue management tactics, and explain how revenue management software aids hotel managers.

(continued)


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 officeand sales divisions

Determination of discounting activity

(continued)


Benefits of Revenue Management

Improved development of short-term and long-termbusiness 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

(continued)


Revenue Management Methods Capacity management

Balances risks of overbooking against potentialloss 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 reservationsin order to protect rooms for multi-dayreservations (which represent higher levels ofrevenue)


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

(continued)


Revenue Management Formulas

Formula 6: Room rate achievement factor

Formula 7: Yield statistic

Formula 8: RevPAR

Formula 9: Equivalent occupancy

Formula 10: Required non-room revenue per guest

(continued)


Potential Average Single Rate

Single Room Revenues at Rack Rate

Number of Rooms Sold as Singles


Potential Average Double Rate

Double Room Revenues at Rack Rate

Number of Rooms Sold as Doubles


Rate Spread

Potential Average Double Rate

Potential Average Single Rate


Potential Average Rate

(Multiple Occupancy % Rate Spread) Potential Average Single Rate


Room Rate Achievement Factor

Actual Average Rate

Potential Average Rate


Yield Statistic Formulas

Formula #1Actual Rooms Revenue

Potential Rooms Revenue

Formula #2 Room Nights Sold Actual Average Room Rate

Room Nights Available Potential Average Rate

Formula #3Occupancy Percentage Room Rate Achievement Factor


RevPAR Formulas

Formula #1

Actual Rooms Revenue

Available Rooms Revenue

Formula #2

Occupancy Percentage Average Daily Rate


Elements of RevenueManagement Strategies

Group room sales

Transient room sales

Food and beverage activity

Local and area-wide activities

Special events

Fair market share forecasting


Revenue ManagementMeeting Participants

General manager

Sales managers

Catering managers

Reservations manager

Front office manager

Food and beverage manager


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

(continued)


High Demand Tactics

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

(continued)


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


Four Revenue Management Tactics

Hurdle rate

Minimum length of stay

Close to arrival

Sell-through


Revenue Management Software

Revenue management software provides:

Continuous monitoring

Consistency

Information availability

Performance tracking

Special reports

chapter 13 revenue management power point presentation

Documents