Revenue & Yield Management
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DAY 2 REVENUE & YIELD MANAGEMENT
REVENUE MANAGEMENT BACKGROUND DEFINITION: FOR A COMPANY AND FOR HOTEL OBJECTIVES ADVANTAGES MEASUREMENTS USAGE
BACKGROUN AIRLINES 1970 DEMAND PERIODS DIFFERENT RATES ABILITY TO LOOK AT A SALES HORIZON 45 TO 90 DAYS SET PRICE AND RESERVATIONS POLICIES PREDICTION OF PROFITABILITY **SEND MONEY FOR PRODUCTS BESIDES THE ROOM ITSELF
YIELD MANAGEMENT Yield management is a technique focusing management decision-making on maximizing pro"t from the sales of hotel rooms (Choi and Cho, 1997). Although yield management has been used quite extensively in the airline and hotel industries elsewhere (Brotherton and Mooney, 1992; Carter, 1988; Donaghy et al. (1995); Larsen, 1988; Williams, 1987)
DEFINITION
IN A COMPANY, this is the total amount of money received by the company for goods sold or services provided during a certain time period.
IN A HOTEL: Is the technique of planning to achieve maximum room rates and most profitable guest.
OBJECTIVES TWOFOLD: TO MAXIMIZE PROFIT FOR GUEST ROOM SALES AND TO MAXIMIZE PROFIT FOR HOTEL SERVICES
STRATEGIES WHEN DEMAND IS HIGH, MAXIMIZE RATES; WHEN DEMAND IS LOW, MAXIMIZE ROOM SALES HIGH: MAX RATES, REQUIRE MINM STAYS LOW: MAX ROOM SALES, OPEN ALL RATE CATEGORIES
USAGE Revenue management has also taken hold widely throughout the rest of the Travel industry as well. Almost all major Hotel, Car Rental Agencies, Cruise Lines and Passenger Railroad firms have, or are developing, revenue management systems. Other industries that appear ripe for the application of revenue management concepts include Golf Courses, Freight Transportation, Health Care, Utilities, Television Broadcast, Spa Resorts, Advertising, Telecommunications, Ticketing, Restaurants and Web Conferencing.
COMPARATIVE.PDF
5 STEPS
Step 1 :Gathering Information Current Status How many rooms are currently reserved ? How many are guaranteed by credit cards ? How many group bookings versus transients ? What controls are now in place ? What percentage of the reservations will actually arrive ? What plans are in place for advertising, promotion … ?
Step 1 : Historical data of a hotel How many transient and group rooms were occupied on the same day of the week : last week, month, year, previous years ? How many room nights were lost on those similar days ? What rates were in effect ? What controls were in effect ?
Step 1 : Community happenings Is there any city wide event planned that will bring overnight business ? Are there any new business moving to the city ? Any new flights at the airport ? Are there any chamber of commerce plans for marketing the city ? Did any community event impact the occupancies in the past ?
Step 1 : Hotel’s competition Making test calls anonymously to competitive hotels, What occupancy can the competition be expected to do ? What are the rates of the competition ?
Step 2 : Analyse demand What type of guests are they ? How much will they pay ? Will it be necessary to turn away guests ? How many ? The more information which is analysed, the more accurate the forecasts will be !!!
Step 3 : Forecast Why forecasting ? How many employees to schedule ? How many supplies to order ? Owners and management need projections ! Control bookings to maximise revenue … Remember, it is important when doing the forecast to do it consistently on the same number of days in advance each time !!!
Step 4 : Take Action Do not wait until the hotel is full to set controls ! Only use controls for periods of high demands ! The greater the demand, the greater the opportunity for profit. Controls can be dangerous if incorrectly used. Do not set and forget !!! Have the Yield’s decision been fully communicated !
Step 5 : Evaluate Actions A management team is like a sports team : Both teams decide strategy and take actions Both can measure results Both want to improve Sports team watches videos, management looks at reports Sports team wants to score, management wants revenue !
Review Questions 1. Explain in your own words the concept of revenue management. 2. What does occupancy percentage tell the owner of a hotel? Discuss the shortcomings of this concept in measuring the effectiveness of a GM. 3. Similarly, discuss the use of occupancy percentage in determining the effectiveness of a general manager versus the concept of average daily rate (ADR). What impression does quoting only the ADR give the owner of a hotel? 4. What similarities to operational design do the airline and hotel industry share? 5. What are the goals of Revenue Management - if you were employed as a Front Desk Agents would you see these goals being reached.
PRACTICE Suggest the yield strategy and tactics to use under the following circumstances at the Times Hotel: A) The Flying Pilots are coming to town and will draw 50,000 people. Every room in town is expected to be taken. What policy should the hotel develop for transient room reservations? B) The last two weeks in September are usually very slow, but a local festival will attract visitors who may request reservations for single overnight accommodation. What policy should the hotel develop for accepting room reservations?
REVENUE MANAGEMENT BACKGROUND DEFINITION: FOR A COMPANY AND FOR HOTEL OBJECTIVES ADVANTAGES MEASUREMENTS USAGE
BACKGROUN AIRLINES 1970 DEMAND PERIODS DIFFERENT RATES ABILITY TO LOOK AT A SALES HORIZON 45 TO 90 DAYS SET PRICE AND RESERVATIONS POLICIES PREDICTION OF PROFITABILITY **SEND MONEY FOR PRODUCTS BESIDES THE ROOM ITSELF
YIELD MANAGEMENT Yield management is a technique focusing management decision-making on maximizing pro"t from the sales of hotel rooms (Choi and Cho, 1997). Although yield management has been used quite extensively in the airline and hotel industries elsewhere (Brotherton and Mooney, 1992; Carter, 1988; Donaghy et al. (1995); Larsen, 1988; Williams, 1987)
DEFINITION
IN A COMPANY, this is the total amount of money received by the company for goods sold or services provided during a certain time period.
IN A HOTEL: Is the technique of planning to achieve maximum room rates and most profitable guest.
OBJECTIVES TWOFOLD: TO MAXIMIZE PROFIT FOR GUEST ROOM SALES AND TO MAXIMIZE PROFIT FOR HOTEL SERVICES
STRATEGIES WHEN DEMAND IS HIGH, MAXIMIZE RATES; WHEN DEMAND IS LOW, MAXIMIZE ROOM SALES HIGH: MAX RATES, REQUIRE MINM STAYS LOW: MAX ROOM SALES, OPEN ALL RATE CATEGORIES
USAGE Revenue management has also taken hold widely throughout the rest of the Travel industry as well. Almost all major Hotel, Car Rental Agencies, Cruise Lines and Passenger Railroad firms have, or are developing, revenue management systems. Other industries that appear ripe for the application of revenue management concepts include Golf Courses, Freight Transportation, Health Care, Utilities, Television Broadcast, Spa Resorts, Advertising, Telecommunications, Ticketing, Restaurants and Web Conferencing.
COMPARATIVE.PDF
5 STEPS
Step 1 :Gathering Information Current Status How many rooms are currently reserved ? How many are guaranteed by credit cards ? How many group bookings versus transients ? What controls are now in place ? What percentage of the reservations will actually arrive ? What plans are in place for advertising, promotion … ?
Step 1 : Historical data of a hotel How many transient and group rooms were occupied on the same day of the week : last week, month, year, previous years ? How many room nights were lost on those similar days ? What rates were in effect ? What controls were in effect ?
Step 1 : Community happenings Is there any city wide event planned that will bring overnight business ? Are there any new business moving to the city ? Any new flights at the airport ? Are there any chamber of commerce plans for marketing the city ? Did any community event impact the occupancies in the past ?
Step 1 : Hotel’s competition Making test calls anonymously to competitive hotels, What occupancy can the competition be expected to do ? What are the rates of the competition ?
Step 2 : Analyse demand What type of guests are they ? How much will they pay ? Will it be necessary to turn away guests ? How many ? The more information which is analysed, the more accurate the forecasts will be !!!
Step 3 : Forecast Why forecasting ? How many employees to schedule ? How many supplies to order ? Owners and management need projections ! Control bookings to maximise revenue … Remember, it is important when doing the forecast to do it consistently on the same number of days in advance each time !!!
Step 4 : Take Action Do not wait until the hotel is full to set controls ! Only use controls for periods of high demands ! The greater the demand, the greater the opportunity for profit. Controls can be dangerous if incorrectly used. Do not set and forget !!! Have the Yield’s decision been fully communicated !
Step 5 : Evaluate Actions A management team is like a sports team : Both teams decide strategy and take actions Both can measure results Both want to improve Sports team watches videos, management looks at reports Sports team wants to score, management wants revenue !
Review Questions 1. Explain in your own words the concept of revenue management. 2. What does occupancy percentage tell the owner of a hotel? Discuss the shortcomings of this concept in measuring the effectiveness of a GM. 3. Similarly, discuss the use of occupancy percentage in determining the effectiveness of a general manager versus the concept of average daily rate (ADR). What impression does quoting only the ADR give the owner of a hotel? 4. What similarities to operational design do the airline and hotel industry share? 5. What are the goals of Revenue Management - if you were employed as a Front Desk Agents would you see these goals being reached.
PRACTICE Suggest the yield strategy and tactics to use under the following circumstances at the Times Hotel: A) The Flying Pilots are coming to town and will draw 50,000 people. Every room in town is expected to be taken. What policy should the hotel develop for transient room reservations? B) The last two weeks in September are usually very slow, but a local festival will attract visitors who may request reservations for single overnight accommodation. What policy should the hotel develop for accepting room reservations?
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