0. Revenue Management

1. Competencies for Revenue Management
Explain the concept of revenue management, and discuss how managers can maximize revenue by using forecast information in capacity management, discount allocation, and duration control.
Discuss common formulas managers use to measure and manage revenue.
(continued)

2. Competencies for Revenue Management
(continued)
Explain how revenue management decisions are affected by group room sales, transient room sales, other revenue opportunities, local and area-wide activities, special events, and fair market share forecasting.
Discuss the revenue manager’s role and position, summarize typical revenue meetings, outline potential tactics to use in periods of high and low demand, discuss revenue management tactics, and explain how revenue management software helps hotel managers.

3. Benefits of Revenue Management
Improved forecasting
Improved seasonal pricing and inventory decisions
Identification of new market segments
Identification of market segment demands
Enhanced coordination between the front office and sales divisions
Determination of discounting activity
(continued)

4. Benefits of Revenue Management
(continued)
Improved development of short-term and long-term business plans
Establishment of a value-based rate structure
Increased business and profits
Savings in labor costs and other operating expenses
Initiation of consistent guest-contact scripting

5. Revenue Management Methods
Capacity management
Balances risks of overbooking against potential loss of revenue from reservation cancellations, early departures, and no-shows
Discount allocation
Restricts time period and product mix (rooms) available at reduced or discounted rates
Duration control
Places time constraints on accepting reservations in order to protect rooms for multi-day reservations (which represent higher levels of revenue)

6. Revenue Management Formulas
Formula 1: Potential average single rate
Formula 2: Potential average double rate
Formula 3: Multiple occupancy percentage
Formula 4: Rate spread
Formula 5: Potential average rate
Formula 6: Room rate achievement factor
Formula 7: Yield statistic

7. Revenue Management Formulas
Formula 8: RevPAR
Formula 9: Identical yields
Formula 10: Equivalent occupancy
Formula 11: Required non-room revenue per guest
RevPAG
GOPPAR

8. Potential Average Single Rate
Single Room Revenues at Rack Rate Number of Rooms Sold as Singles

9. Potential Average Double Rate
Double Room Revenues at Rack Rate Number of Rooms Sold as Doubles

10. Rate Spread
Potential Average Double Rate  Potential Average Single Rate

11. Potential Average Rate
(Multiple Occupancy %  Rate Spread)  Potential Average Single Rate

12. Room Rate Achievement Factor
Actual Average Rate Potential Average Rate

13. Yield Statistic Formulas
Actual Rooms Revenue
Potential Rooms Revenue
Formula #2
Room Nights Sold Actual Average Room Rate
Room Nights Available Potential Average Rate
Formula #3
Occupancy Percentage  Room Rate Achievement Factor 

14. RevPAR Formulas
Formula #1 Actual Room Revenue Available Rooms Formula #2 Occupancy Percentage  Average Daily Rate

15. Identical Yield Occupancy Percentage = Current Occupancy Percentage 
Identical Yields
Identical Yield Occupancy Percentage = Current Occupancy Percentage 
Current Average Rate
Proposed Average Rate

16. RevPAG and GOPPAR RevPAG = GOPPAR = Total Revenue Number of Guests
Departmental Revenues – Departmental Expenses
Number of Available Rooms

17. Elements of Revenue Management Strategies
Group room sales
Transient room sales
Other revenue opportunities
Local and area-wide activities
Special events
Fair market share forecasting

18. Revenue Manager Skills and Qualities
Operational skills
Analytical skills
Strategic skills
Organizing skills
Communications skills
Good listening skills
Team-building skills
Team-building skills
Training skills
Patience
Creativity
Cooperativeness
Flexibility

19. Revenue Management Meeting Participants
General manager
Sales managers
Catering managers
Reservations manager
Front office manager
Food and beverage manager

20. High-Demand Tactics Close or restrict discounts
Apply minimum length of stay restrictions carefully
Reduce group room allocations
Reduce or eliminate 6 p.m. holds
Tighten guarantee and cancellation policies
Raise rates to be consistent with competitors
Consider a rate raise for packages
Apply full price to suites and executive rooms
Select dates that are to be closed-to-arrivals
Evaluate the benefits of sell-throughs
Apply deposits and guarantees to last night of stay

21. Low-Demand Tactics Sell value and benefits Offer packages
Keep discount categories open
Encourage upgrades
Offer stay-sensitive price incentives
Remove stay restrictions
Involve your staff
Establish relationships with competitors
Lower rates

22. Four Revenue Management Tactics
Hurdle rate
Minimum length of stay
Close to arrival
Sell-through

23. Revenue Management Software
Revenue management software provides:
Continuous monitoring
Consistency
Information availability
Performance tracking
Special reports