Revenue & Yield Management

8/14/2019 Revenue & Yield Management

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DAY 2

REVENUE

&

YIELD

M A N A G E M E N T


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REVENUE MANAGEMENT

BACKGROUNDDEFINITION: FOR A COMPANY ANDFOR HOTEL

OBJECTIVESADVANTAGES

MEASUREMENTS

USAGE


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BACKGROUN

AIRLINES 1970

DEMAND PERIODS

DIFFERENT RATES

ABILITY TO LOOK AT A SALES HORIZON45 TO 90 DAYS

SET PRICE AND RESERVATIONS

POLICIESPREDICTION OF PROFITABILITY

**SEND MONEY FOR PRODUCTSBESIDES THE ROOM ITSELF


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YIELD MANAGEMENT

Yield management is a technique focusingmanagement decision-making on maximizingpro"t from the sales of hotel rooms (Choi and

Cho, 1997).

Although yield management has been usedquite extensively in the airline and hotel

industries elsewhere (Brotherton and Mooney,1992; Carter, 1988; Donaghy et al. (1995);Larsen, 1988; Williams, 1987)


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DEFINITION

IN A COMPANY, this is the total

amount of money received by thecompany for goods sold or servicesprovided during a certain time period.


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IN A HOTEL: Is the technique ofplanning to achieve maximum room

rates and most profitable guest.


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OBJECTIVES

TWOFOLD:

TO MAXIMIZE PROFIT FOR GUEST ROOM SALES

AND

TO MAXIMIZE PROFIT FOR HOTEL SERVICES


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STRATEGIES

HIGH: MAX RATES, REQUIRE MINMSTAYS

LOW: MAX ROOM SALES, OPEN ALLRATE CATEGORIES

WHEN DEMAND IS HIGH, MAXIMIZERATES;

WHEN DEMAND IS LOW, MAXIMIZE

ROOM SALES


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USAGE

Revenue management has also taken hold widelythroughout the rest of the Travel industry as well.

Almost all major Hotel, Car Rental Agencies, CruiseLines and Passenger Railroad firms have, or are

developing, revenue management systems. Otherindustries that appear ripe for the application of revenue

management concepts include Golf Courses, FreightTransportation, Health Care, Utilities, Television

Broadcast, Spa Resorts, Advertising,Telecommunications, Ticketing, Restaurants and WebConferencing.


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COMPARATIVE.PDF

5 STEPS


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Step 1 :Gathering InformationCurrent 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 willactually arrive ?

What plans are in place for advertising,promotion ?


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Step 1 : Historical data of ahotel

How many transient and group roomswere occupied on the same day of theweek : last week, month, year, previous

years ?How many room nights were lost on thosesimilar days ?

What rates were in effect ?What controls were in effect ?


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Step 1 : Community happenings

Is there any city wide event planned that willbring overnight business ?

Are there any new business moving to thecity ?

Any new flights at the airport ?

Are there any chamber of commerce plansfor marketing the city ?

Did any community event impact the

occupancies in the past ?


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Step 1 : Hotels competition

Making test calls anonymously tocompetitive hotels,

What occupancy can the competition be

expected to do ?

What are the rates of the competition ?


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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, themore accurate the forecasts will be !!!


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Step 3 : ForecastWhy forecasting ?

How many employees to schedule ?

How many supplies to order ?

Owners and management needprojections !

Control bookings to maximise revenue

Remember, it is important when doing theforecast to do it consistently on the samenumber of days in advance each time !!!


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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 Yields decision been fullycommunicated !


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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, managementlooks at reports

Sports team wants to score, managementwants revenue !


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Review Questions

1. Explain in your own words the concept of revenuemanagement.

2. What does occupancy percentage tell the owner of a hotel?Discuss the shortcomings of this concept in measuring theeffectiveness of a GM.

3. Similarly, discuss the use of occupancy percentage indetermining the effectiveness of a general manager versus theconcept of average daily rate (ADR). What impression doesquoting only the ADR give the owner of a hotel?

4. What similarities to operational design do the airline andhotel industry share?

5. What are the goals of Revenue Management - if you wereemployed as a Front Desk Agents would you see these goals

being reached.


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PRACTICE

Suggest the yield strategy and tactics to use under thefollowing circumstances at the Times Hotel:

A) The Flying Pilots are coming to town and will draw50,000 people. Every room in town is expected to be taken.What policy should the hotel develop for transient roomreservations?

B) The last two weeks in September are usually very slow,but a local festival will attract visitors who may requestreservations for single overnight accommodation. Whatpolicy should the hotel develop for accepting room

reservations?

Revenue & Yield Management

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