Download Chapter 6 – Yield Management

Chapter 6
Revenue Management
Copyright © 2007 by John Wiley &
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Chapter 6 Focus Points
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Review occupancy percentage and its
effectiveness
Review average daily rate and its effectiveness
Review RevPAR and its effectiveness
Discuss history of revenue management
Discuss use of revenue management
Outline components of revenue management
Demonstrate applications of revenue
management
Copyright © 2007 by John Wiley &
Sons, Inc. All rights reserved
Review Definition of Occupancy Percentage
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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
Copyright © 2007 by John Wiley &
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Definition of Average Daily Rate
ADR
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Average Daily Rate (ADR) -
A measure of
the hotel’s staff efforts in selling available room rates
Total Room Sales
Number of Rooms Sold
Copyright © 2007 by John Wiley &
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Definition of RevPAR
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RevPAR – ability of a hotel to produce income
how many dollars each room is producing.
Room Revenue
Number of Available Rooms
or
Hotel occupancy % x ADR
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and
Discussion Question
Utility of Occupancy percentage, ADR, and
RevPAR?
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Discussion Question Answer
 Used
to project room revenues
 Demonstrate how room revenue is
calculated
 Leads into Revenue Management
Copyright © 2007 by John Wiley &
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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
on-site for food and beverage
Copyright © 2007 by John Wiley &
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Use of Yield Management
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Goals of yield management
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Maximize profit for guest room sales
Maximize profit for hotel services
(food, beverage, and convention services)
Discuss yield management software example
in chapter (p. 170-171)
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maxim® Revenue Management Solutions
(MaximRMS)
RevenueDASHBOARD™
OPERA Revenue Management
Copyright © 2007 by John Wiley &
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Revenue Manager
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Reports to general manager
 Works closely with marketing and sales
department
 Consults with front office manager
 Job duties – refer to job listing (p. 171)
Copyright © 2007 by John Wiley &
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Components of Revenue Management
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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)
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Revenue Realized
Number of Rooms Sold x Actual Rate
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Revenue Potential
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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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Components of Revenue Management (cont’d.)
Yield = Revenue Realized (# Rooms Sold x ADR)
Revenue Potential (# Rooms Available x Rack Rate)
See p. 172 in text for demonstration of Yield
formula
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Compare and contrast the concepts of yield
and occupancy percentage (refer to Tables
6-1) p. 172 and (6-2) p.173
Copyright © 2007 by John Wiley &
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Optimal Occupancy and Optimal
Rate
Optimal occupancy- Achieving 100%
occupancy with room sales which will
yield the highest room rate.
 Optimal Rate - A room rate which
approaches the rack rate.
 Review scenario p. 173 to consider
possibilities!
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Strategies
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Discuss components and strategies to
employ when using yield Management
(refer to Table 6-3) p. 174
 High demand for rooms = Maximize room
rates
demand for rooms = Maximize room
sales
 Carol Verret’s comments on establishing
target numbers sales, manipulation of rates in
the electronic distribution channels as well as
revenue drivers within the organization (central
reservations, property-level
reservations, and
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Inc. All rights
reserved
sales department,
web
site) p. 174
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Low
Forecasting
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Importance of daily accuracy in
forecasting.
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Block-Out Periods
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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
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Discuss the
importance of using
computers and
standard operating
procedures when
using yield
management
 Discuss the
importance of
training to use a
yield management
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system
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Channel Management
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Reservation Channels
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Central Reservations
GDS
Third-party reservation system
Toll-free phone reservation
Travel Agent
Managing the Channels
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Rebecca Oliver’s article – pp. 176-177
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Advanced systems to manage central reservations offices and
electronic reservation channels available
That now combines the maximization of yield with a revenue
management system which is connected to a PMS
Copyright © 2007 by John Wiley &
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Feedback
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Discuss the
importance of
feedback on turn-away business in a
yield management
system (refer to Table
6-4; p. 177) = “Dollars
Lost”
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Management Challenges In Using
Revenue Management
Alienation of Customers
 Minimum stay requirements
 Price gouging
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Considerations for Food and
Beverage Sales
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Review Table 6-5 p.
178
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Applications of Revenue Management
p. 179
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Scenarios #1 –
Determine Yield
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Scenario #2 –
Homecoming Weekend
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Scenario #3 –
Governor’s Conference
vs. Jazz Weekend
Copyright © 2007 by John Wiley &
Sons, Inc. All rights reserved