chapter 13 revenue management power point presentation
TRANSCRIPT
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© 2005, Educational Institute
Chapter 13Revenue Management
Managing Front Office Operations
Seventh Edition
(333TXT or 333CIN)
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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)
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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)
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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)
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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)
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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)
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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
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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)
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Potential Average Single Rate
Single Room Revenues at Rack Rate
Number of Rooms Sold as Singles
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Potential Average Double Rate
Double Room Revenues at Rack Rate
Number of Rooms Sold as Doubles
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Rate Spread
Potential Average Double Rate
Potential Average Single Rate
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Potential Average Rate
(Multiple Occupancy % Rate Spread) Potential Average Single Rate
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Room Rate Achievement Factor
Actual Average Rate
Potential Average Rate
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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
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RevPAR Formulas
Formula #1
Actual Rooms Revenue
Available Rooms Revenue
Formula #2
Occupancy Percentage Average Daily Rate
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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
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Revenue ManagementMeeting Participants
General manager
Sales managers
Catering managers
Reservations manager
Front office manager
Food and beverage manager
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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)
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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)
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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
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Four Revenue Management Tactics
Hurdle rate
Minimum length of stay
Close to arrival
Sell-through
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Revenue Management Software
Revenue management software provides:
Continuous monitoring
Consistency
Information availability
Performance tracking
Special reports