2. Revenue Management Week 5 Subject : V0206 – Administrasi & Operasional Kantor Depan Year : 2009

3. Bina Nusantara 3 Subject Occupancy percentage Average daily rate RevPARComponents and use of revenue management Applications of revenue management

4. Bina Nusantara 4 Objectives: On completion of this lesson, the students will be able to: - apply revenue management as a means of maximizing the room revenue to produce a profit

5. Bina Nusantara 5 Occupancy Percentage Occupancy percentage is a traditional view of measuring the effectiveness of the general manager, marketing staff and front office staff For investors: to determine the potential gross income of a lodging establishment

6. Bina Nusantara 6 It is used to answer such questions: How many rooms were sold? How effective were reservation agents in meeting the room and amenity needs of the guests? How competent were front office staff members in making the sale? Occupancy Percentage

7. Bina Nusantara 7 Review Definition of Occupancy Percentage Occupancy Percentage - reveals the success of a hotel’s staff in attracting guests to a particular property Number of Rooms Sold x 100 Number of rooms available Double Occupancy Percentage – measure of a hotel staff’s ability to attract more than one guest to a room; thus a higher room rate and additional income Number of Guests – Number of Rooms Sold x 100 Number of Rooms Sold

8. Bina Nusantara 8 Definition of Average Daily Rate ADR Average Daily Rate (ADR) - A measure of the hotel’s staff efforts in selling available room rates Total Room Sales Number of Rooms Sold

9. Bina Nusantara 9 Definition of RevPAR RevPAR – ability of a hotel to produce income and how many dollars each room is producing. Room Revenue Number of Available Rooms or Hotel occupancy % x ADR

10. Bina Nusantara 10 Discussion Question Utility of Occupancy percentage, ADR, and RevPAR? Answers: Used to project room revenues Demonstrate how room revenue is calculated Leads into Revenue Management

11. Bina Nusantara 11 History of Yield Management Airline industry’s use of yield Management –Deregulation of airlines in late 1970s “Take It or Leave It” –Certain periods, certain seats, certain flights… Compare similarities of the airline industry and hotel industry Volatile product Demand periods which places the producers in a favorable position Indicate differences of the airline industry and hotel industry in using yield management Hotel groups can spend large amounts of money on- site for food and beverage

12. Bina Nusantara 12 Components of Revenue Management Yield – the percentage of income that could be secured if 100% of available rooms are sold at their full rack rate (highest room rate posted for a room in a hotel) Revenue Realized Number of Rooms Sold x Actual Rate Revenue Potential Number of Rooms Available for Sale x Rack Rate Yield = Revenue Realized (# Rooms Sold x ADR) Revenue Potential (# Rooms Available x Rack Rate)

13. Bina Nusantara 13 Revenue Manager Reports to general manager Works closely with marketing and sales department Consults with front office manager

14. Bina Nusantara 14 Use of Yield Management To maximize profit for guest room sales To maximize profit for hotel services

15. Bina Nusantara 15 Yield = Revenue realized Revenue potential YIELD FORMULA

16. Bina Nusantara 16 Determining Yield The Times Hotel has 300 rooms available for sale and sold 200 rooms at $85 with a rack rate of $110 How many % is the Yield? The Yield is 51,51% 200 x $85 = $17,000 x 100 = 51.51% 300 x $110 = $33,000 The 51% yield means the staff’s effort in achieving maximum occupancy could have been improved by using effective strategies to sell more $110 rooms.

17. Bina Nusantara 17 Thus, the goal of yield management is to sell all available rooms at the highest rate (rack rate) Determining Yield

18. Bina Nusantara 18 Occupancy Percentage Comparison HotelNo. Rooms Available No. Rooms Sold RateIncomeOccupancy % ABC500200 400 $80 $95 $16,000 $19,000 $35,000 80% XYZ500100 300 400 $80 $95 $ 8,000 $28,500 $36,500 80%

19. Bina Nusantara 19 Yield Comparison HotelRevenue Realized Revenue Potential Yield % ABC$35,000$47,50073.68 XYZ$36,500$47,50076.84 *500 rooms x $95 (rack rate) = $47,500

20. Bina Nusantara 20 Which Hotel has Achieved the Highest Yield? Both hotels have achieved an 80% occupancy, but hotel XYZ has achieved a higher yield while selling the same amount of rooms

21. Bina Nusantara 21 Optimal Occupancy Achieving 100% occupancy With room sales, which will Yield the highest room rate Optimal Room Rate A room rate that approaches the rack rate, work together to produce the yield Optimal Occupancy and Optimal Rate

22. Bina Nusantara 22 Optimal Occupancy & Optimal Rate Situation 1: A 300-room hotel has sold: –100 rooms at $76 –150 rooms at $84 –35 rooms at $95 (rack rate) The yield = 83 Situation 2: A 300-room hotel has sold: –200 rooms at $90 –85 rooms at $95 (rack rate) The yield = 91% Additional revenue = $2,550

23. Bina Nusantara 23 Yield Management Strategies DemandStrategy HighMaximize rates, require minimum stays LowMaximize room sales, open all rate categories

24. Bina Nusantara 24 Forecasting Importance of daily accuracy in forecasting. Accurate forecasting of transient demand will assist hoteliers in developing strategies to maximize sales to this group

25. Bina Nusantara 25 Block-Out Periods Block-out periods - Tagging certain dates in a time period when rooms have to be sold at a certain rate and/or certain number of minimum room rental nights

26. Bina Nusantara 26 Automated Systems and Procedures Discuss the importance of using computers and standard operating procedures when using yield management Discuss the importance of training to use a yield management system

27. Bina Nusantara 27 Channel Management Reservation Channels –Central Reservations –GDS –Third-party reservation system –Toll-free phone reservation –Travel Agent

28. Bina Nusantara 28 Management Challenges In Using Revenue Management Alienation of Customers Minimum stay requirements Price gouging