DAY 2

REVENUE
&
YIELD
MANAGEMENT
REVENUE MANAGEMENT
BACKGROUND
DEFINITION: FOR A COMPANY AND
FOR HOTEL
OBJECTIVES
ADVANTAGES
MEASUREMENTS
USAGE
 BACKGROUN
AIRLINES 1970
DEMAND PERIODS
DIFFERENT RATES
ABILITY TO LOOK AT A SALES HORIZON
45 TO 90 DAYS
SET PRICE AND RESERVATIONS
POLICIES
PREDICTION OF PROFITABILITY
**SEND MONEY FOR PRODUCTS
BESIDES THE ROOM ITSELF
 YIELD MANAGEMENT
Yield management is a technique focusing
management decision-making on maximizing
pro"t from the sales of hotel rooms (Choi and
Cho, 1997).

Although yield management has been used

quite extensively in the airline and hotel
industries elsewhere (Brotherton and Mooney,
1992; Carter, 1988; Donaghy et al. (1995);
Larsen, 1988; Williams, 1987)
 DEFINITION

IN A COMPANY, this is the total

amount of money received by the
company for goods sold or services
provided during a certain time period.
IN A HOTEL: Is the technique of
planning to achieve maximum room
rates and most profitable guest.
 OBJECTIVES

TWOFOLD:
TO MAXIMIZE PROFIT FOR GUEST ROOM SALES
AND
TO MAXIMIZE PROFIT FOR HOTEL SERVICES
 STRATEGIES
WHEN DEMAND IS HIGH, MAXIMIZE
RATES;
WHEN DEMAND IS LOW, MAXIMIZE
ROOM SALES

HIGH: MAX RATES, REQUIRE MINM

STAYS
LOW: MAX ROOM SALES, OPEN ALL
RATE CATEGORIES
 USAGE
Revenue management has also taken hold widely
throughout the rest of the Travel industry as well.
Almost all major Hotel, Car Rental Agencies, Cruise
Lines and Passenger Railroad firms have, or are
developing, revenue management systems. Other
industries that appear ripe for the application of revenue
management concepts include Golf Courses, Freight
Transportation, Health Care, Utilities, Television
Broadcast, Spa Resorts, Advertising,
Telecommunications, Ticketing, Restaurants and Web
Conferencing.
COMPARATIVE.PDF

5 STEPS
Step 1 :Gathering Information
Current Status
How many rooms are currently reserved ?
How many are guaranteed by credit cards ?
How many group bookings versus transients ?
What controls are now in place ?
What percentage of the reservations will
actually arrive ?
What plans are in place for advertising,
promotion … ?
 Step 1 : Historical data of a
hotel
How many transient and group rooms
were occupied on the same day of the
week : last week, month, year, previous
years ?
How many room nights were lost on those
similar days ?
What rates were in effect ?
What controls were in effect ?
Step 1 : Community happenings

Is there any city wide event planned that will

bring overnight business ?
Are there any new business moving to the
city ?
Any new flights at the airport ?
Are there any chamber of commerce plans
for marketing the city ?
Did any community event impact the
occupancies in the past ?
Step 1 : Hotel’s competition
Making test calls anonymously to
competitive hotels,
What occupancy can the competition be
expected to do ?
What are the rates of the competition ?
 Step 2 : Analyse demand
What type of guests are they ?
How much will they pay ?
Will it be necessary to turn away guests ?
How many ?

The more information which is analysed, the

more accurate the forecasts will be !!!
 Step 3 : Forecast
Why forecasting ?
How many employees to schedule ?
How many supplies to order ?
Owners and management need
projections !
Control bookings to maximise revenue …
Remember, it is important when doing the
forecast to do it consistently on the same
number of days in advance each time !!!
 Step 4 : Take Action
Do not wait until the hotel is full to set controls !
Only use controls for periods of high demands !
The greater the demand, the greater the
opportunity for profit.
Controls can be dangerous if incorrectly used.
Do not set and forget !!!
Have the Yield’s decision been fully
communicated !
 Step 5 : Evaluate Actions
A management team is like a sports team :
Both teams decide strategy and take actions
Both can measure results
Both want to improve
Sports team watches videos, management
looks at reports
Sports team wants to score, management
wants revenue !
 Review Questions

1. Explain in your own words the concept of revenue

management.

2. What does occupancy percentage tell the owner of a hotel?

Discuss the shortcomings of this concept in measuring the
effectiveness of a GM.

3. Similarly, discuss the use of occupancy percentage in

determining the effectiveness of a general manager versus the
concept of average daily rate (ADR). What impression does
quoting only the ADR give the owner of a hotel?

4. What similarities to operational design do the airline and

hotel industry share?

5. What are the goals of Revenue Management - if you were

employed as a Front Desk Agents would you see these goals
being reached.
 PRACTICE
Suggest the yield strategy and tactics to use under the
following circumstances at the Times Hotel:

A) The Flying Pilots are coming to town and will draw

50,000 people. Every room in town is expected to be taken.
What policy should the hotel develop for transient room
reservations?

B) The last two weeks in September are usually very slow,

but a local festival will attract visitors who may request
reservations for single overnight accommodation. What
policy should the hotel develop for accepting room
reservations?