Chapter 6
Revenue Management
Copyright © 2007 by John Wiley & Son
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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 & Son
s, Inc. All rights reserved
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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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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Discussion Question Answer
Used to project room revenues
Demonstrate how room revenue is
calculated
Leads into Revenue Management
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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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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. 170-171)
maxim® Revenue Management Solutions
(MaximRMS)
RevenueDASHBOARD™
OPERA Revenue Management
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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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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)
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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 & Son
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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
demand for rooms = Maximize room sales
Low
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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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. 176-177
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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Management Challenges In Using
Revenue Management
Alienation of Customers
Minimum stay requirements
Price gouging
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Considerations for Food and
Beverage Sales
Review Table 6-5 p.
178
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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 & Son
s, Inc. All rights reserved