Revenue

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					OPTIMIZING REVENUES
Rooms Revenue
       and
 Yield Concepts
          Today’s Learning
ROOMS REVENUE AND YIELD CONCEPTS

DEVELOPING A PRICING AND POSITIONING
STRATEGY

SEGMENTATION AND MARKETING STRATEGIES

FORECASTING EXAMPLES AND ACTIONS

INCENTIVES TO RAISE REVENUE
     Hotel Revenue Management System

The critical steps in any hotel revenue
management system are:

1.   Market segment identification
2.   Differential pricing
3.   Demand forecasting
4.   Pricing of the different market segments
5.   Allocation
Price-Demand Curve
Price-Demand Curve
                   EXERCISE:
              The Network Question
A 4* Beautiful Resort property, serving business travelers
is down to its last two rooms for the coming Monday and
Tuesday, but there are plenty rooms available for the rest
of the week. Four customers want to make booking at
the reservation desk.


Which combination would be accepted to produce the
highest revenue?
CUSTOMER    NIGHTS       RATE         COMMENTS


A          Monday      $100         Full rate


B          Tuesday     $100         Full rate


C          Monday &    $150 total   Two-day
           Tuesday                  package

D          Monday to   $350 total   Business
           Friday                   Weekly rate
             The Concept and Forecasting
                             Forecast of occupancy:
                                                                       100
                             with increasing accuracy when time
                                                                        90
                             comes closer
                                                                        80
                                                                        70

                              Budget                                    60
                                                                        50
                                                                        40
                               Forecast
                                                                        30
                               Actual                                   20
                                                                        10
                                                                         0

Lead time      60              45               30                15
(days)




       Moment in time where occupancy is low:
 What  does the forecast say?
 What is the total revenue, actual sold,
  of the hotel for that day?
 What should be the price of the room?
 Who is the customer that calls during
  the time of the red arrow and what price
  band might they be in?
 Serious action needed to address
  possible missed opportunities
       Allocation of Rooms

The allocation of inventory (hotel rooms)
among different market segments.

The ratio of discounted versus full priced
rooms is not fixed during the reservation
period; rather, it is “tweaked”appropriately
as the date of stay approaches.
                 Overbooking
Overbooking is the practice of intentionally selling
more rooms than are available in order to offset
the effect of cancellations and no-shows.

Studies estimate that although a hotel is fully booked, about
5-8% of the rooms are vacant on any given date.
Poor overbooking decisions can prove to be very expensive
for the hotel.
       Overbooking Implications
  Short term
  loss of room revenue
  Long-term
 decreased customer loyalty
 loss of hotel reputation, etc.


  American Airlines developed an optimization model that
  maximizes net revenues associated with overbooking
  decisions for the airline industry.
         Yield Management Strategies

 As demand exceeds supply    Increase Rates to Maximize Profits




As supply exceeds demand
                        Decrease Rates to Maximize Occupancy
                Yield Statistics

            actual rooms revenue
Yield =
           potential rooms revenue
            (Every room sold at full rack rate)

  Yield is the percentage of income that could be secured
  if 100% of available rooms were sold at full rack rate
                   Yield Exercise
 The Beautiful Resort has 500 rooms available, it sells 200
 rooms at $85 with a rack rate of $100.

          What’s the yield of The Beautiful Resort ?




Yield =
             actual rooms revenue
            potential rooms revenue
            (Every room sold at full rack rate)
                Occupancy versus Yield

                        number of rooms occupied
Occupancy Rate =
                        number of rooms available



           actual rooms revenue
Yield =
          potential rooms revenue
          (Every room sold at full rack rate)
           EXERCISE:
      Occupancy versus Yield
Beautiful Resort has 500 rooms available,
it sells 275 rooms at $80 and 125 rooms at
$120 rack rate.

1. What is the occupancy rate?
2. What is the yield?
                       Exercise
     A rival hotel, Classic Resort, also has 500 rooms available,
     it sells 125 rooms at $80 and 275rooms
     at $120 rack rate


1.   What is the occupancy rate?
2.   What is the yield?

				
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