Revenue management
To provide the right service to the right customer at the right time for the right price
History of revenue
Started in U.S. airlines after 1978 deregulation. Spread to Europe & Asia with low-cost airlines.
Technology like reservation systems and customer databases helped it grow.
Profit formula
Profit = Revenue - Expense
Revenue
The total amount of sales achieved in a specified time period.
Revenue formula
RS x ADR
RM objective
Maximize revenue per available time-based inventory unit
Gain higher market share percentage
Maximize resources
RevPar formula
REVPAR = OCC% * ADR
How do you maximize revenue?
ADR up / sell more
OCC up / more expensive
Market share
The percentage of total sales in a market that a company (or hotel) controls compared to its competitors.
What does maximize revenue mean?
Using what you have (like staff, rooms, money, time, or technology) in the best and most efficient way to get the highest results.
Price elasticity
How much people change what they buy when the price changes
Marginal cost
The extra cost of making one more unit of a product or service
Revenue Management Myths
An information system is required
RM is only useful for establishments with large production
A large old data base is needed
When do we apply RM?
HIGH DEMAND: price optimization / ADR up
LOW DEMAND: optimization of available capacity
How do you gain more market share?
By using USP
Will make you stand out and gain more market share
What are the main indicators of RM?
Occ, ADR, REVPAR
Total revenue
Cancellations and no shows
How should your average daily rate (ADR) compare to your competitors?
Be above competitors
Be lower so you can gain more market share
What is the meaning of release (relase date) for a specific offer or rate?
Deadline to cancel reservations in accommodation contracts.
