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11 Cards in this Set
- Front
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What is revenue management? • Revenue Management is the deployment of strategiesand tactics to maximize the organization’s revenue potential. • RM makes use of capacity allocation models, humanintellectual capital, technology, forecasting, consumer behavior, dynamicpricing and macroeconomics. • Revenue Management is a discipline employed toaugment, supplement, increase and grow revenue streams throughout the businessenterprise. |
Objectives of RM: • Focus onrevenue generation, not cost reduction, to increase profits. • Typicalfinancial goal is to achieve a 4% to 8%increase in top line revenues on an annual, recurring basis. • Incrementalrevenues flow through to the bottom line—a 1% increase in revenue can generatea 7% increase in profit |
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Qualifiers for RM • 1. Fixed capacity • 2. Demand and price are highly variable • 3. High fixed costs • 4. Purchase commitment is usually made in advance • 5. Inventory is perishable |
STAR REPORTS - Occupancy % (Measures: proportion of rooms sold, Strength: easyto compute, Weakness: does not consider ADR) - ADR (Measures: rate at which rooms were sold, Strength: easy to compute,Weakness: does not consider occupancy %) - RevPAR (Measures: rooms revenue generated per available room, Strength: easyto compute, Weakness: does not consider nonrooms) - RevPOR (Measures: total revenue generated per occupied room, Strength: easy tocompute, Weakness: does not consider nonrooms revenue or profitability) - Total RevPar (Measures: total revenue generated by room,Strength: Considers all hotelrevenue generated (e.g rooms, F&B and meeting space), Weakness: does notconsider profitability) - GOPPAR:(Measures: GOP generated per available room, Strength: Assessesprofitability of room sales effort, Weakness: Results dependent on non-RM efforts; data may beunavailable) - Flow-through: (Measures:proportion of revenue increase converted to gross operating profit increase,Strength: assesses profitability of incremental revenues, Weakness: resultsdependent on non-RM efforts; data may not be readily accessible) |
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Forecasting considerations: -competitiveenvironment (market share, market depth, corporate objectives) -economicenvironment (unemployment rate, interest rates, inflation, consumerconfidence, investor confidence, the dollar) -politicalenvironment (government policies & regulations, election year, educationof the workforce, impact on economy) -technologicalenvironment (computer friendly environment, technological advancements& changes, need to have computer skills set) -trendanalysis (What are today’s consumers demanding? What do they want? Whatdo they expect from the Hospitality enterprise?) |
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ADR xOccupancy Percentage = RevPAR
Total RevPAR - The average rooms and nonrooms revenue generated by each available guest room during a specific period of time Total (Rooms + Nonrooms) revenue/ Total rooms available for sale = Total RevPAR |
RevPAR Limitations - RevPARis calculated using rooms revenue only. - Foodand beverage and other sources of revenue do not affect RevPAR. - When RMs excessivelyfocus on RevPAR, they believe maximizing revenues take precedent over all otherconsiderations. - As a result, roomscould be sold at rates close to (or even below) variable operating costsbecause every incremental dollar of room revenue achieved increases RevPAR—nomatter how low the room rate or its affect on GOPPAR. |
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RevPASH (revenue per available seat hour): = Average Check * Seat Occupancy Accordingly if I have anAverage Check value of $12.80 and a seat occupancy per hour of 45% then ($12.80* 0.45) = $5.76 = RevPASH.
Alternatively:Total revenue/available seat hours = RevPash |
How do I increase myRevPASH? 1 Average Check. Any tools to attract morecustomers and to convince them to pay more (WOW Factors and Promotions,Strategic and Differential Pricing, Excellent Sales Skills by Staff, Powerfuland Attractive Menu) 2. Accelerating the Duration Period. Any tools toserve more guests at the certain period of time (Well trained staff, propertools and equipment, easy of enter and departure, preassembled menu items)
3. Seating capacity If we can increase seating capacity then we canincrease our RevPASH (Interior design, take out, delivery, drivethrough, outdoor patio) |
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GOPPAR Grossoperating profit (GOP) - Total revenuesless management-controllable operating expenses. GOP can be expressed indollars or as a percentage of total revenue. |
- GOPPAR is calculated using total, not rooms only, hotel revenue. - A GOPPAR calculation includes expense as well as revenue but focuses only on those expenses that can be controlled by on-site hotel managers. - GOP is the numerator in the GOPPAR formula.
- The calculation is based on the total number of available rooms in the property and thus it avoids the limitations of those statistics (such as RevPOR) that are determined by the number of sold rooms only. |
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Flow-through - The relative change in profit dollarsexpressed as a percentage of the change in revenue dollars. Understanding theflow-through characteristics of a specific hotel helps its RMs betterunderstand the importance of generating profitable incremental revenues and theimportance of utilizing effective revenue optimization, rather than revenuemaximization, techniques. |
GOP this year - GOP last year/ Total revenues this year - Total revenues last year = Flow-through. |
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Revenue management for Ski resorts Approximately 275 Canadian ski areas see more over 19 million visits perseason. Canadian skiers and snowboarders ski or snowboard anaverage of 7.5 days per year. TheCanadian Ski Industry is a significant contributor to the Canadian economy. |
Revenuegeneration can be enhanced and augmented by giving attention to the followingelements: - Price (Encourage and support the purchase of a seasonpass, employ differential pricing (Season, time of the day, day of the week, VIP) - Product placement, enhancement and promotion(Equipmentrental shops, individual and group lessons, F&B, spas, customer loyalty andrewards programs, services) - Technology (Computerized lift ticket sales, electronicmessaging advertising and promoting products and services, free wi-fi with ads) |
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Cornell University 4Cs Calendar (Use past data to predict futuredemand) Clock (Knowing the time when thecustomer is willing to pay more) Capacity (Sell available capacity soonerand earn revenue faster, minimize unsold inventory and to maximize the value ofthe inventory which is sold. Cost (Set pricing according to forecasteddemand, set different prices depending on the season, to attract customersduring the low season) |
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Golf Revenue can be optimized by managing: Price (Different price points) Technology (GPS enabled golf carts, screen visuals, computerized check ins/check outs, F&B ordering online) Time (All parties must make use of golf carts, build golf courses that have smaller foot prints, set time frames for a playing party) Complimentary Goods & Services (Pro shops/Gift shops, beverage and snack carts, course from the professional) |
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