Introduction to Revenue Management

OPTIMIZACIÓN DE INGRESOS. CONFERENCE ON REVENUE MANAGEMENT [pic]

TOTAL REVENUE MANAGEMENT

OPPORTUNITIES & PITFALLS

PROF. Horatiu Tudori

Lausanne Êcole Hotêllier

INTRODUCTION & DEFINITIONS

✓ The basis for Revenue Management (RM) is the value as perceived by the customer in regards to the product.

✓ In order for RM to be successful it is necessary to understand this value.

✓ RM could be defined as the capacity to make people pay what they think the product is worth.

✓ Be able to provide the right service, at the right time, for the right price, to the right customer and through the right channel of distribution or sale.

✓ It could also be described as a set of rules: if the customer wants to play all by his rules (no restrictions, no penalties, no difference in day of arrival or length of stay), then the price will go up; if the customer is willing to play by the hotel's rules, then the price will go down.

STRATEGIES OF RM

The measurement of success of a hotel comes from the maximization of RevPar, which equals Quantity times Price in two different types of operations:

Total Revenue / Total number of rooms

ADR * Occupancy

ADR is related to Dinamic Pricing as Occupancy is related to duration management, the two strategies of RM.

In order to implement these two strategies, clear segments must be recognized, traditionally in hotels we have:

• Groups, composed by: MICE, SMERF, Leisure

• Transients, composed by:

o Unqualified, Business and Leisure, who have no special treatment or special rates, being the only fully yieldable segment.

o Qualified, Business and Leisure, meaning that they have a special status as guest and have negotiated rates (making them either Semi or Non Yieldable).

An approach to price management is through barriers or fences, which avoid all customers to go to lower rates, they can either be:

• Tangible: inventory, position, view, amenities

• Non-tangible:...