Yield Management

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 Number of rooms available 

x 100

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

THANK YOU 