Apply the ratios and formulas managers use to forecast and control revenue and expenses.
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REVENUE MANAGEMENT
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Transcript of Apply the ratios and formulas managers use to forecast and control revenue and expenses.
REVENUE MANAGEMENT
Apply the ratios and formulas managers use to forecast and control revenue and expenses.
OBJECTIVE
Revenue Management -the application of disciplined tactics that predict buyer response
to prices, optimize product availability, and yield the greatest business income
REVENUE MANAGEMENT
Revenue = no. of units X unit price
Goal of RM1) Maximize profit for guestroom sales.2)Maximize profit for hotel services. * Maximize profit from sale of rooms and
services by using a combination of pricing and inventory control.
REVENUE MANAGEMENT
YIELDthe percentage of income that could be secured
if 100 percent of available rooms were sold at full
rack ratesRealized Revenue - actual amount of room revenue
earnedRevenue Potential – room revenue that could be received if all rooms were sold at rack rates
e.g
COMPONENTS OF REVENUE MANAGEMENT
Yield = Revenue realized Revenue Potential
x 100 = 44.4%
Revenue Manager- oversee the room inventory and room rates offered throughout the year to groups and individuals- * central reservation system- * global distribution system- * third –party reservation system- * toll-free reservation number
identify trends and methods to match those trends
REVENUE MANAGEMENT
FORECASTING ROOM AVAILABILITY forecasting the number of rooms available for sale on
any future date : helps manage the reservation process guide for an effective rooms management
Data NeededNumber of expected room arrivalsNumber of expected room walk-insNumber of expected room stayoversNumber of expected room no-showsNumber of expected room cancellationNumber of expected room understaysNumber of expected room check-outsNumber of expected room overstays
Maximizing Total Room Revenues
FORECASTING ROOM AVAILABILITY · Forecasted Number of Rooms Available for
Sale = Total Number of Guest Rooms – Number of Out of Order Rooms
- Number of Stayovers Rooms – Number of Reserved Rooms + Number of No-show Rooms + Number of Cancellation Rooms + Number of Check-Out Rooms + Number of Understay Rooms – Number of Overstay Rooms
Maximizing Total Room Revenues
FORECASTING ROOM AVAILABILITY Daily Operational RatiosNo-shows % = (number of no-show rooms) /
(number of rooms reserved) * 100Cancellation % = (number of cancellation
rooms) / (number of rooms reserved) * 100Walk-ins % = (number of walk-in rooms) / (total
number of rooms arrivals) * 100Overstays % = (number of overstay rooms) /
(number of expected check-outs) * 100Understays % = (number of understay rooms) /
(number of expected check-outs) * 100
Maximizing Total Room Revenues
Maximizing Total Room Revenues
Operational Ratios:
1. Occupancy Ratios·Occupancy ratios measure the success of the front office in selling the hotel’s primary product (i.e. guestrooms).
Occupancy Percentage = (Number of Rooms Occupied)
(Total Number of Rooms
Available For Sale) * 100
- Multiple Occupancy Percentage = (Number of Rooms Occupied by More Than One Guest) / (Total Number of Rooms Occupied) * 100
- Single Occupancy Percentage = (Number of Single Rooms Occupied) / (Total Number of Single Rooms Available For Sale) * 100
- Double Occupancy Percentage = (Number of Double Rooms Occupied) / (Total Number of Double Rooms Available for Sale) * 100
- Triple Occupancy Percentage = (Number of Triple Rooms Occupied) / (Total Number of Triple Rooms Available For Sale) * 100
Maximizing Total Room Revenues
Other Operational StatisticsAverage Guests Per Rooms Sold =
(Total Number of Guests) / (Total Number of Rooms Sold)
Average Daily Rate = (Actual Room Revenue) / (Total Number of Rooms Sold)
Average Rate per Guest = Revenue Per Available Customer (RevPAC) = (Actual Room Revenue) / (Number of Guests)
Revenue Per Available Room (RevPAR) = (Actual Room Revenue) / (Number of Available Rooms)
1) Effectively managing REVPAR (revenue per available room).
2) Developing a competitive yet profitable room rate structure for the hotel.
3) Utilizing a yield management system to provide historical and current reservationinformation.
4) Developing and implementing successful selling strategies
The Process Of Maximizing Total Room Revenues
REVPAR: Revenue per Available Room
- combines room occupancy and room rate information to measure a hotel’s ability to maximize total room revenue
- identifies the hotel’s ability to manage both occupancy (rooms sold) and average rate in maximizing room revenues
REVENUE MANAGEMENT
REVPAR: Revenue per Available Room
Computation:
REVPAR = Occupancy Percentage X Average Room Rate
OR
REVPAR = total rooms revenue total rooms available
REVENUE MANAGEMENT
REVPAR: Revenue per Available Room
Uses of REVPAR 1. It is used as a measure of the hotel management
team’s ability to maximize total room revenue.2. It is used to compare the hotel performance to
similar hotels in the same market area. This is called the hotel competitive set.
3. It is used to measure the hotel’s progress in consistently increasing total room revenue compared to previous years and the budget.
4. It is used by owners, outside investors, and other financial institutions to project future room revenues and cash flows.
REVENUE MANAGEMENT
Rate Structures and Market Segments- Rate structures are the range of room rates that a
hotel establishes for different market segments
- year-round room rates - seasonal room rates
- Customers choose which hotel they will stay in based on rate, experience, location, and the expected overall value of the service they will receive
- the central point of room rate structures is the regular rate or rack rate
REVENUE MANAGEMENT
Factors to Consider in Establishing Room Rate
1. Rates of their primary competition2. Age of the hotel, including recent renovations and
improvements3. Perceived value of the products and services delivered
by the hotel4. Location5. Cost of the hotel and the return on investment (ROI)
required by investors6. Any competitive advantages that the hotel might have
over its competition
Revenue Management
- booking pace determines appropriate selling strategies that a hotel can put in place to maximize room revenues for a specific day of arrival
REVENUE MANAGEMENT
1) Effectively managing REVPAR (revenue per available room).
2) Developing a competitive yet profitable room rate structure for the hotel.
3) Utilizing a yield management system to provide historical and current reservationinformation.
4) Developing and implementing successful selling strategies
The Process Of Maximizing Total Room Revenues
