1. REVENUE MANAGEMENT

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

3. REVENUE MANAGEMENT
Revenue Management -the application of disciplined tactics that predict buyer response to prices, optimize product availability, and yield the greatest business income

4. 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.

5. 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%

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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)

12. 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

13. 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

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

15. 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.

16. 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

18. 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

19. 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

20. 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