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
Revenue management is the act of skilfully, carefully and tactfully managing, controlling and
directing capacity and sources of income, given the constraints of supply and demand.
Capacity The amount of space that can be filled
Supply The amount of a good or service that a seller is willing and able to sell for any
given price at any given time.
Demand The amount of a good or service that a purchaser is willing and able to buy for
any price at any given time.
General
History of revenue management Since the first markets revenue management is applied.
The last products had more value because of the worth of it. The airline industry started with a
system of managing yield. This system soon generated additional revenue. The hotel industry
began to take notice and analyze how the application of similar techniques could increase
room revenue just as it had increased seat revenues.
Why is Revenue Management important within the hospitality industry?
1) Involves many of the basic concepts that comprise the field of Economics, such as
markets, forecasts, cost, scarcity (schaarste), and elasticity.
2) The 4p’s are equally important elements in the development of Revenue management
techniques. We need to understand the needs, wants, desires and expectations of the
guests.
3) Psychology: Important to understand what motivates people to act upon their impulses
4) For an understanding in the world of finance.
5) Is useful developing goals and objectives in the creation of a strategic revenue
management plan for the organization.
Important trends impacting Revenue Management (strategies)
- Advanced technology
- Advanced customer knowledge
- New ways of distribution
- New services and prices
- New products
- Social networking
- internet
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
Revenue management is the act of skilfully, carefully and tactfully managing, controlling and
directing capacity and sources of income, given the constraints of supply and demand.
Capacity The amount of space that can be filled
Supply The amount of a good or service that a seller is willing and able to sell for any
given price at any given time.
Demand The amount of a good or service that a purchaser is willing and able to buy for
any price at any given time.
General
History of revenue management Since the first markets revenue management is applied.
The last products had more value because of the worth of it. The airline industry started with a
system of managing yield. This system soon generated additional revenue. The hotel industry
began to take notice and analyze how the application of similar techniques could increase
room revenue just as it had increased seat revenues.
Why is Revenue Management important within the hospitality industry?
1) Involves many of the basic concepts that comprise the field of Economics, such as
markets, forecasts, cost, scarcity (schaarste), and elasticity.
2) The 4p’s are equally important elements in the development of Revenue management
techniques. We need to understand the needs, wants, desires and expectations of the
guests.
3) Psychology: Important to understand what motivates people to act upon their impulses
4) For an understanding in the world of finance.
5) Is useful developing goals and objectives in the creation of a strategic revenue
management plan for the organization.
Important trends impacting Revenue Management (strategies)
- Advanced technology
- Advanced customer knowledge
- New ways of distribution
- New services and prices
- New products
- Social networking
- internet
