REVENUE MANAGEMENT

OBJECTIVE Apply the ratios and formulas managers use to forecast and control revenue and expenses.

REVENUE MANAGEMENT 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 RM 1) 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.

Yield = Revenue realized Revenue Potential COMPONENTS OF REVENUE MANAGEMENT YIELD the percentage of income that could be secured if 100 percent of available rooms were sold at full rack rates Realized Revenue - actual amount of room revenue earned Revenue Potential – room revenue that could be received if all rooms were sold at rack rates e.g Yield = Revenue realized Revenue Potential x 100 = 44.4%

REVENUE MANAGEMENT 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

Maximizing Total Room Revenues 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 Needed Number of expected room arrivals Number of expected room walk-ins Number of expected room stayovers Number of expected room no-shows Number of expected room cancellation Number of expected room understays Number of expected room check-outs Number 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

FORECASTING ROOM AVAILABILITY Daily Operational Ratios Maximizing Total Room Revenues FORECASTING ROOM AVAILABILITY Daily Operational Ratios No-shows % = (number of no-show rooms) / (number of rooms reserved) * 100 Cancellation % = (number of cancellation rooms) / (number of rooms reserved) * 100 Walk-ins % = (number of walk-in rooms) / (total number of rooms arrivals) * 100 Overstays % = (number of overstay rooms) / (number of expected check-outs) * 100 Understays % = (number of understay rooms) / (number of expected check-outs) * 100

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

Other Operational Statistics Maximizing Total Room Revenues Other Operational Statistics Average 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)

Effectively managing REVPAR (revenue per available room). The Process Of Maximizing Total Room Revenues Effectively managing REVPAR (revenue per available room). Developing a competitive yet profitable room rate structure for the hotel. Utilizing a yield management system to provide historical and current reservation information. Developing and implementing successful selling strategies

REVENUE MANAGEMENT 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 Computation: REVPAR: Revenue per Available Room Computation: REVPAR = Occupancy Percentage X Average Room Rate OR REVPAR = total rooms revenue total rooms available

REVENUE MANAGEMENT Uses of REVPAR 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

Rates of their primary competition Factors to Consider in Establishing Room Rate Rates of their primary competition Age of the hotel, including recent renovations and improvements 3. Perceived value of the products and services delivered by the hotel 4. Location 5. Cost of the hotel and the return on investment (ROI) required by investors 6. Any competitive advantages that the hotel might have over its competition

REVENUE MANAGEMENT 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

Effectively managing REVPAR (revenue per available room). The Process Of Maximizing Total Room Revenues Effectively managing REVPAR (revenue per available room). Developing a competitive yet profitable room rate structure for the hotel. Utilizing a yield management system to provide historical and current reservation information. Developing and implementing successful selling strategies