Introduction to Revenue Management for the Hospitality Industry
Important calculations
Actual revenue: rooms sold x actual room price
Maximum revenue: rooms available x highest published price
Occupancy: rooms sold / rooms available x 100
RevPar: actual revenue / rooms available
RevPor: actual revenue / rooms sold
Yield: actual revenue / maximum revenue x 100
Fair share: max. revenue own hotel / max revenue market x 100
Actual share: actual revenue own hotel / actual revenue market share x 100
Chapter 4. Market segmentation and selection
Market segmentation: dividing a market into smaller specific segments, sharing the
same characteristics.
Demography: study of characteristics of a population. (Age, gender, education,
income, religion, nationality etc).
Frequent traveller programme: to reward loyal patronage and encourage repeat
business.
Transient: temporary individual hospitality customer
- alone and purchasing a product for a short time
Group business: more than 2 individuals coming together for a common
reason (football team flying together etc).
Sub segments:
Leisure
- Vacation
- VFR (visit friends & relatives)
- special events (weddings)
Business
- Job responsibility
- Attending trainings
- Conferences with co workers
(corporate, government, associates)
See page 44 for more information
Wholesaler: a person who purchases individual travel components at a discount,
based on volume and repackages the components and sells them to a consumer on
retail basis, either directly through the wholesaler organization or via a travel agent/
tour operator.
Free sell: rooms considered to be sold, based upon space
Wash factor: predetermined percentage of usage based upon historical data and
experience.
Environmental scanning: constantly monitoring and assessing the environment to
spot changes and emerging trends.
American generational sub segments:
Silver haired senior aka The silent generation
- born to 1946
- survived 1st/2nd world war
- don’t broadcast purchase intentions
- expect value for their money
, Baby boomers
- born between 1946 – 1964
- anxious and ready to spend
- highest medium income of all generations
- no plans to retire
Generation X aka Baby busters
- born between 1965 – 1976
- very individualistic
- extremely value aware
Generation Y aka Echo boomers
- born between 1977 – 1994
- extremely comfortable with technology
- extremely brand conscious
Millennials
- born after 1994
Based upon market segment & trend analysis, organizations will be able to develop new
products and services to attract and retain their desired mix of customers.
Displacement: replacing one customer for another
Displacement analysis: company assesses the worth of one customer vs. another
Customer worth: how much value a particular customer is to a company
Customer value: how much the customer wants/needs the product (worth of product)
Primary purchase: main purchase made during a single/series of transactions
Ancillary purchase: supplementary or additional purchase made during a single/series
of transactions.
Total Customer Worth = Primary Revenue + Ancillary Revenue – Acquisition Cost
Total CW = (Primary Rev+ Ancillary Rev – Acquisition Cost) x Propensity Y
Propensity Y: How often a guest comes
Example:
Esther comes 10 times a year at hotel Ommen, pays €250 per night per room and eats diner
€35 + breakfast €15. €1 per visit acquisition costs.
CW = 250 + 50 (35+15) – 1 x 10 = €2990
CRM (Customer Relationship Management): to describe strategies and tactics
developed to acquire and retain customers.
Chapter 5. Internal assessment and competitive analysis
Competitor: a rival with whom one competes
Competitive set: an organization’s primary direct competitors
Secondary competitors: not in organization’s competitive set, but must stay visible on
organization’s radar.
Competitive intelligence: the practice of conducting primary research and analyzing
secondary research to understand the characteristics of competitors.
SCIP: Society of Competitive Intelligence Professionals
Important calculations
Actual revenue: rooms sold x actual room price
Maximum revenue: rooms available x highest published price
Occupancy: rooms sold / rooms available x 100
RevPar: actual revenue / rooms available
RevPor: actual revenue / rooms sold
Yield: actual revenue / maximum revenue x 100
Fair share: max. revenue own hotel / max revenue market x 100
Actual share: actual revenue own hotel / actual revenue market share x 100
Chapter 4. Market segmentation and selection
Market segmentation: dividing a market into smaller specific segments, sharing the
same characteristics.
Demography: study of characteristics of a population. (Age, gender, education,
income, religion, nationality etc).
Frequent traveller programme: to reward loyal patronage and encourage repeat
business.
Transient: temporary individual hospitality customer
- alone and purchasing a product for a short time
Group business: more than 2 individuals coming together for a common
reason (football team flying together etc).
Sub segments:
Leisure
- Vacation
- VFR (visit friends & relatives)
- special events (weddings)
Business
- Job responsibility
- Attending trainings
- Conferences with co workers
(corporate, government, associates)
See page 44 for more information
Wholesaler: a person who purchases individual travel components at a discount,
based on volume and repackages the components and sells them to a consumer on
retail basis, either directly through the wholesaler organization or via a travel agent/
tour operator.
Free sell: rooms considered to be sold, based upon space
Wash factor: predetermined percentage of usage based upon historical data and
experience.
Environmental scanning: constantly monitoring and assessing the environment to
spot changes and emerging trends.
American generational sub segments:
Silver haired senior aka The silent generation
- born to 1946
- survived 1st/2nd world war
- don’t broadcast purchase intentions
- expect value for their money
, Baby boomers
- born between 1946 – 1964
- anxious and ready to spend
- highest medium income of all generations
- no plans to retire
Generation X aka Baby busters
- born between 1965 – 1976
- very individualistic
- extremely value aware
Generation Y aka Echo boomers
- born between 1977 – 1994
- extremely comfortable with technology
- extremely brand conscious
Millennials
- born after 1994
Based upon market segment & trend analysis, organizations will be able to develop new
products and services to attract and retain their desired mix of customers.
Displacement: replacing one customer for another
Displacement analysis: company assesses the worth of one customer vs. another
Customer worth: how much value a particular customer is to a company
Customer value: how much the customer wants/needs the product (worth of product)
Primary purchase: main purchase made during a single/series of transactions
Ancillary purchase: supplementary or additional purchase made during a single/series
of transactions.
Total Customer Worth = Primary Revenue + Ancillary Revenue – Acquisition Cost
Total CW = (Primary Rev+ Ancillary Rev – Acquisition Cost) x Propensity Y
Propensity Y: How often a guest comes
Example:
Esther comes 10 times a year at hotel Ommen, pays €250 per night per room and eats diner
€35 + breakfast €15. €1 per visit acquisition costs.
CW = 250 + 50 (35+15) – 1 x 10 = €2990
CRM (Customer Relationship Management): to describe strategies and tactics
developed to acquire and retain customers.
Chapter 5. Internal assessment and competitive analysis
Competitor: a rival with whom one competes
Competitive set: an organization’s primary direct competitors
Secondary competitors: not in organization’s competitive set, but must stay visible on
organization’s radar.
Competitive intelligence: the practice of conducting primary research and analyzing
secondary research to understand the characteristics of competitors.
SCIP: Society of Competitive Intelligence Professionals
