CHAPTER 6 Revenue Management

A management technique of planning to achieve maximum room rates and most profitable guests

Copyright 2007 by John Wiley & Sons, Inc. All rights reserved

Review Definition of Occupancy Percentage

Occupancy Percentage - reveals the success of a

hotels staff in attracting guests to a particular property

Number of Rooms Sold x 100 Number of rooms available Average Daily Rate (ADR) - A measure of the hotels
staff efforts in selling available room rates

Total Room Sales Number of Rooms Sold

Copyright 2007 by John Wiley & Sons, Inc. All rights reserved

Definition of RevPAR

RevPAR ability of a hotel to produce income

how many dollars each room is producing.
Room Revenue Number of Available Rooms or Hotel occupancy % x ADR

and

Copyright 2007 by John Wiley & Sons, Inc. All rights reserved

History of Yield Management

Airline industrys 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
Copyright 2007 by John Wiley & Sons, Inc. All rights reserved

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

maxim Revenue Management Solutions (MaximRMS) RevenueDASHBOARD OPERA Revenue Management

Copyright 2007 by John Wiley & Sons, Inc. All rights reserved

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)

Copyright 2007 by John Wiley & Sons, Inc. All rights reserved

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.

High demand for rooms = Maximize room rates Low demand for rooms = Maximize room sales

Copyright 2007 by John Wiley & Sons, Inc. All rights reserved