REVENUE MANAGEMENT Unit VII 1 Revenue Management Formulas

REVENUE MANAGEMENT Unit VII 1

Revenue Management Formulas Ø Ø Ø Ø 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 2

Revenue Management Methods Ø Capacity management: Balances risks of overbooking against potential loss of revenue from reservation cancellations, early departures, and no-shows. Ø Discount allocation: Restricts time period and product mix (rooms) available at reduced or discounted rates Ø Duration control: Places time constraints on accepting reservations in order to protect rooms for multi-day reservations (which represent higher levels of revenue) 3

Revenue Management Formulas Ø Ø Ø Formula 8: Rev PAR Formula 9: Identical yields Formula 10: Equivalent occupancy Formula 11: Required non-room revenue per guest Rev PAG GOPPAR 4

Yield Statistic Formulas Formula #1 Actual Rooms Revenue Potential Rooms Revenue Formula #2 Room Nights Sold __________ X Room Nights Available Actual Average Room Rate ____________ Potential Average Rate Formula #3 Occupancy Percentage � Room Rate Achievement Factor 5

Rev PAR Formulas Formula #1 Actual Room Revenue Available Rooms Formula #2 Occupancy Percentage � Average Daily Rate 6

Elements of Revenue Management Strategies Ø Ø Ø Group room sales Transient room sales Other revenue opportunities Local and area-wide activities Special events Fair market share forecasting 7

Revenue Management Meeting Participants Ø Ø Ø General manager Sales managers Catering managers Reservations manager Front office manager Food and beverage manager 8

High-Demand Tactics Ø Ø Ø 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 9

Low-Demand Tactics Ø Ø Ø Ø Ø 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 10

Four Revenue Management Tactics Ø Hurdle rate Ø Minimum length of stay Ø Close to arrival Ø Sell-through 11

Revenue Management Software Revenue management software provides: Ø Ø Ø Continuous monitoring Consistency Information availability Performance tracking Special reports 12

BIBLIOGRAPHY Textbook of Hotel Front Office Management & Operations by Manoj Kumar Yadav. Ø Check-in Check-out Managing Hotel Operations by Gary K. Vallen and Jorome J. Vallen. Ø Managing Front office Operations by. Michael L Kasavana Phd, Richard M. Brooks. Ø Hotel Front Office Training Manual by Suvradeep Gaurang Ghosh. Ø

Bibliography Ø The Hospitality Industry www. hospitalitynet. org Ø www. indianhospitalityonline. com/ Ø www. hospitality-industry. com Ø www. ibef. org Ø www. hospitalityupgrade. com Ø