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Subject
Year
: V0206 – Administrasi &
Operasional Kantor Depan
: 2009
Revenue Management
Week 5
Subject
• Occupancy percentage
• Average daily rate
• RevPARComponents and use of revenue management
• Applications of revenue management
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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
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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
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Occupancy Percentage
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?
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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
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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
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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
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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
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History of Yield Management
•
•
•
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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 onsite for food and beverage
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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)
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Revenue Manager
• Reports to general manager
• Works closely with marketing and sales
department
• Consults with front office manager
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Use of Yield Management
To maximize profit
for guest room
sales
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To maximize profit
for hotel services
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YIELD FORMULA
Yield = Revenue realized
Revenue potential
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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.
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Determining Yield
• Thus, the goal of yield management is
to sell all available rooms at the
highest rate (rack rate)
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Occupancy Percentage Comparison
Hotel
No. Rooms
Available
No.
Sold
Rate
Income
Occupancy %
ABC
500
200
200
400
$80
$95
$16,000
$19,000
$35,000
80%
100
300
400
$80
$95
$ 8,000
$28,500
$36,500
80%
XYZ
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500
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Yield Comparison
Hotel
Revenue
Revenue
Yield %
ABC
$35,000
$47,500
73.68
XYZ
$36,500
$47,500
76.84
*500 rooms x $95 (rack rate) = $47,500
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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
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Optimal Occupancy and Optimal Rate
Optimal Occupancy
Optimal Room Rate
A room rate that
Achieving 100% occupancy approaches the rack rate,
With room sales, which will
work together to
Yield the highest room rate
produce the yield
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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
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• 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
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Yield Management Strategies
Demand
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Strategy
High
Maximize rates, require minimum stays
Low
Maximize room sales, open all rate
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Forecasting
• Importance of daily accuracy in forecasting.
• Accurate forecasting of transient demand
will assist hoteliers in developing strategies
to maximize sales to this group
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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
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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
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Channel Management
• Reservation Channels
–
–
–
–
–
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Central Reservations
GDS
Third-party reservation system
Toll-free phone reservation
Travel Agent
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Management Challenges In Using Revenue
Management
• Alienation of Customers
• Minimum stay requirements
• Price gouging
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