Revenue Management
YIELD MANAGEMENT
ANAND BANDA
OBJECTIVES
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
YIELD MANAGEMENT
ANAND BANDA
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…
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
Yield management: Yield management is
a process to achieve maximum room rates
and most profitable guest (profit from
guest spending on hotels food & beverage
outlets, health club, gift shop etc). It is a
part of successful administration of
reservations system, which helps
managers to produce a favorable income
statement.
Use of Yield Management
Goals of yield management
Maximize profit for guest room sales
Maximize profit for hotel services
(food, beverage, and convention services)
maxim Revenue Management Solutions (MaximRMS)
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
YIELD MANAGEMENT ANAND BANDA
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
YIELD MANAGEMENT ANAND BANDA
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
YIELD MANAGEMENT ANAND BANDA
Discussion Question
Utility of Occupancy percentage, ADR, and RevPAR?
• Used to project room revenues
• Demonstrate how room revenue is calculated
• Leads into Revenue Management
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)
Components of Revenue Management (cont’d.)
Yield = Revenue Realized (# Rooms Sold x ADR)
Revenue Potential (# Rooms Available x Rack Rate)
Compare and contrast the concepts of yield
and occupancy percentage
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.
Strategies
components and strategies to employ when using
yield Management
High demand for rooms = Maximize room
rates
Low demand for rooms = Maximize room sales
establish 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)
Forecasting
Importance of daily accuracy in forecasting.
Room availability forecast formulae:
Once the relevant occupancy statistics have been
gathered the number of rooms available for sale on any
given date can be determined by the following formulae
Total no of rooms
- no of ooo rooms
- no of stay overs
- no of reservations
- no of reservations x % of no show
+ no of under stays
- no of over stays
= ROOMS AVAILABLE FOR SALE
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.
It is also called as Blanket reservation
Management Challenges In Using
Revenue Management
Alienation of Customers
Minimum stay requirements
Price gouge
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