Tell me when you want to stay, and I will tell you what to pay… Tell me what you want to pay, but then I tell you when to stay…

Revised definition… Revenue Management is: the art and science of optimising total contribution of an organisation’s multiple revenue streams by controlling price and availability of products in line with the strategic direction [and ambitions] of the organisation

The right product (=capacity) Simply put… The right product (=capacity) To the right person The goal of hotel revenue management can be summed up simply as follows: selling the right room to the right customer at the right price at the right time. On a playing field defined by duration and price, the game of hotel revenue management presents the challenge of maximizing revenue per available room. What's the right room? Well, that room might have to do with what floor it's on, what kind of view it is, how large it is. The right customer: maybe this is a customer from a particular market segment, maybe a customer from a business that we're after, or maybe it's a customer from a particular group, or maybe it's an individual customer. Think about loyalty! The right price: this is going to depend on what the demand is like in the city at that time. Sometimes we might have lower prices available, sometimes maybe not. And at the right time: when do we want them to come in and more importantly, when do they book? Right place – Cornell only looks at 4 Ps. The fifth P is as important nowadays with rate parity, BAR and modern booking tools available for both the hotel and the guest/client. For the right price In the right period At the right place (=distribution)

Relatively Fixed Capacity Relatively Fixed Capacity: it is expensive or impractical to add or subtract inventory in the short run, though there may be some ability to shift it. Airline example: the number of seats on a flight is fixed once schedules are set. Possibilities exist to expand on number of seats placed on an airplane , amount of business class seats through “moving curtain” and addition of another flight if a peak demand id identified.

Segmented Market with Predictable Demand per segment Demand for the service can be divided into clear market segments and sensitivity to prices varies among the market segments. Airline example: demand is segmented into business and leisure market segments using discount fare restrictions. Relatively price insensitive business travellers are charged higher fares than the more price sensitive leisure travellers, yet also receive more flexibility to make changes.

Perishable Inventory There is a time dimension to the provision of the service – once that time has passed, the inventory loses all of its value: the inventory of capacity-constrained service firms can be thought of as time during which a unit of capacity is available. Airline example: once a flight has departed, the unsold seat inventory has no value.

Appropriate Cost and Pricing Structure Industries using yield management should possess a cost structure that features high fixed costs and fairly low variable costs. The cost of selling an additional unit of the existing capacity should be low relative to the price of the service. In addition, there should be a considerable flexibility to adjust prices quickly, to reflect variations in the balance of supply and demand. Thus an opportunity to evaluate and accept or reject order requests in advance of the performance of the service. Airline example: the out-of-pocket cost of adding a passenger to a flight is very low. (Meals and servicing expenses of less than $10.)

Time Variable Demand Time Variable Demand: There are definite peaks in demand, which can be predicted, but not with a high degree of certainty. Airline example: passenger demand varies by season, day of the week, and time of day, and can be forecast by flight and fare category, but not precisely per month. Seasonality is a matter of days, or even hours in cases of multiple departure times.

Convenience Factor (Willingness to pay) From the customers point of view towards the product or service purchased inline with their own preference of consumption, convenience of accessibility and flexibility. Generally people are willing to pay more to suit their own convenience definition. Airline example: passenger is willing to pay a premium for receiving flexibility of changing a flight within certain parameters or pay more for a flight that is departing when airport is reachable by public transport.

??? ??? STRATEGIC TACTICAL OPERATIONAL Day of arrival Time > 1 YEAR Stages in RM process… ??? ??? STRATEGIC > 1 YEAR PRICINGS & OFFERINGS POSITIONING SEGMENTS REVIEW OF MARKET DISTRIBUTION PARTNERS IMAGE & IDENTITY TACTICAL CURRENT YEAR AGREE ON SET OF RULES MARKET ANALYSIS DEMAND PATTERN / CALENDAR OPERATIONAL WITHIN BOOKING CURVE OPENING & CLOSING OF RATES MONITOR AND ADJUST Day of arrival Time

STRATEGIC TACTICAL OPERATIONAL Who is involved… STRATEGIC Executive team Rev Mgr (if not already part) TACTICAL Revenue Mgr Sales & Mkt General Mgr Operations OPERATIONAL Revenue Mgr Sales & Mkt General Mgr Day of arrival Time

WHAT HAPPENS TO THE REVPAR? Recap… 100 bedroom hotel 50 rooms occupied ADR €125 Room 51 is sold for €100… WHAT HAPPENS TO THE REVPAR?

Revenue Per Available Room: Old REVPAR… Revenue Per Available Room: Total room revenue = € / $ Number of available rooms 100 (50 × 125) 100 6,250 = = €62.50 Same amount of revenue divided by total number of rooms in the hotel.

Number of available rooms Total room revenue = € / $ New REVPAR… Number of available rooms Total room revenue = € / $ 100 (50 × 125) + 100 100 6,350 = = € 63.50

The availability of rates… Online reputation Qualified/contracted ????? Loyalty Market segment Competitor rates Additional revenue Rate Number of rooms Length of stay Multiple levels of complexity…

Price Online Review Rating Competitor mapping… Hotel D Price Hotel G Hotel A Hotel B Online Review Rating My Hotel Hotel F Hotel C Hotel E Hotel H

External data Internal data Capacity management Price optimization Different focus and input… External data Capacity management Internal data Price optimization

DATA DATA DATA Different stages of RM… TECHNOLOGY ORGANIZATION Culture Communication Responsibility & authority Decision-making Organizational structure Processes and procedures TECHNOLOGY System integration Revenue management system Different stages of RM… TACTICAL Forecasting STRATEGIC Products and offerings Targets and objectives Market segmentation Pricing Distribution PEOPLE Revenue manager background Competences Intuition data analysis DATA data analysis DATA OPERATIONAL Capacity management Price optimization Total revenue management Profit optimization Distribution data analysis DATA