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Revenue Management

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Revenue Management Competencies for Revenue Management Explain the concept of revenue management, and discuss how managers can maximize revenue by using forecast ... – PowerPoint PPT presentation

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Title: Revenue Management


1
Revenue Management
2
Competencies forRevenue Management
  1. Explain the concept of revenue management, and
    discuss how managers can maximize revenue by
    using forecast information in capacity
    management, discount allocation, and duration
    control.
  2. Discuss common formulas managers use to measure
    and manage revenue.

(continued)
3
Competencies forRevenue Management
(continued)
  1. Explain how revenue management decisions are
    affected by group room sales, transient room
    sales, other revenue opportunities, local and
    area-wide activities, special events, and fair
    market share forecasting.
  2. Discuss the revenue managers role and position,
    summarize typical revenue meetings, outline
    potential tactics to use in periods of high and
    low demand, discuss revenue management tactics,
    and explain how revenue management software helps
    hotel managers.

4
Benefits of Revenue Management
  • Improved forecasting
  • Improved seasonal pricing and inventory decisions
  • Identification of new market segments
  • Identification of market segment demands
  • Enhanced coordination between the front office
    and sales divisions
  • Determination of discounting activity

(continued)
5
Benefits of Revenue Management
(continued)
  • Improved development of short-term and long-term
    business plans
  • Establishment of a value-based rate structure
  • Increased business and profits
  • Savings in labor costs and other operating
    expenses
  • Initiation of consistent guest-contact scripting

6
Revenue Management Methods
  • Capacity management
  • Balances risks of overbooking against potential
    loss of revenue from reservation cancellations,
    early departures, and no-shows
  • Discount allocation
  • Restricts time period and product mix (rooms)
    available at reduced or discounted rates
  • Duration control
  • Places time constraints on accepting
    reservations in order to protect rooms for
    multi-day reservations (which represent higher
    levels of revenue)

7
Revenue Management Formulas
  • Formula 1 Potential average single rate
  • Formula 2 Potential average double rate
  • Formula 3 Multiple occupancy percentage
  • Formula 4 Rate spread
  • Formula 5 Potential average rate
  • Formula 6 Room rate achievement factor
  • Formula 7 Yield statistic

8
Revenue Management Formulas
  • Formula 8 RevPAR
  • Formula 9 Identical yields
  • Formula 10 Equivalent occupancy
  • Formula 11 Required non-room revenue per guest
  • RevPAG
  • GOPPAR

9
Potential Average Single Rate
  • Single Room Revenues at Rack Rate
  • Number of Rooms Sold as Singles

10
Potential Average Double Rate
  • Double Room Revenues at Rack Rate
  • Number of Rooms Sold as Doubles

11
Rate Spread
  • Potential Average Double Rate
  • ? Potential Average Single Rate

12
Potential Average Rate
  • (Multiple Occupancy ? Rate Spread) ? Potential
    Average Single Rate

13
Room Rate Achievement Factor
  • Actual Average Rate
  • Potential Average Rate

14
Yield Statistic Formulas
  • Formula 1
  • Actual Rooms Revenue
  • Potential Rooms Revenue
  • Formula 2
  • Room Nights Sold Actual
    Average Room Rate
  • Room Nights Available Potential
    Average Rate
  • Formula 3
  • Occupancy Percentage ? Room Rate Achievement
    Factor

?
15
RevPAR Formulas
  • Formula 1
  • Actual Room Revenue
  • Available Rooms
  • Formula 2
  • Occupancy Percentage ? Average Daily Rate

16
Identical Yields
  • Identical Yield Occupancy Percentage
  • Current Occupancy Percentage ?

Current Average Rate Proposed Average Rate
17
RevPAG and GOPPAR
  • RevPAG
  • GOPPAR

Total Revenue Number of Guests
Departmental Revenues Departmental
Expenses Number of Available Rooms
18
Elements of Revenue Management Strategies
  • Group room sales
  • Transient room sales
  • Other revenue opportunities
  • Local and area-wide activities
  • Special events
  • Fair market share forecasting

19
Revenue Manager Skills and Qualities
  • Operational skills
  • Analytical skills
  • Strategic skills
  • Organizing skills
  • Communications skills
  • Good listening skills
  • Team-building skills
  • Team-building skills
  • Training skills
  • Patience
  • Creativity
  • Cooperativeness
  • Flexibility

20
Revenue Management Meeting Participants
  • General manager
  • Sales managers
  • Catering managers
  • Reservations manager
  • Front office manager
  • Food and beverage manager

21
High-Demand Tactics
  • Close or restrict discounts
  • Apply minimum length of stay restrictions
    carefully
  • Reduce group room allocations
  • Reduce or eliminate 6 p.m. holds
  • Tighten guarantee and cancellation policies
  • Raise rates to be consistent with competitors
  • Consider a rate raise for packages
  • Apply full price to suites and executive rooms
  • Select dates that are to be closed-to-arrivals
  • Evaluate the benefits of sell-throughs
  • Apply deposits and guarantees to last night of
    stay

22
Low-Demand Tactics
  • Sell value and benefits
  • Offer packages
  • Keep discount categories open
  • Encourage upgrades
  • Offer stay-sensitive price incentives
  • Remove stay restrictions
  • Involve your staff
  • Establish relationships with competitors
  • Lower rates

23
Four Revenue Management Tactics
  • Hurdle rate
  • Minimum length of stay
  • Close to arrival
  • Sell-through

24
Revenue Management Software
  • Revenue management software provides
  • Continuous monitoring
  • Consistency
  • Information availability
  • Performance tracking
  • Special reports
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