Yield Management

Chapter 6 Revenue Management
Copyright 2007 by John Wiley & Sons, Inc. All rights reserved
Chapter 6 Focus Points

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
Review Definition of Occupancy Percentage
Occupancy Percentage - reveals the success of a

hotels 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 staffs 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

Definition of Average Daily Rate ADR
Average Daily Rate (ADR) Total Room Sales Number of Rooms Sold
A measure of the hotels staff efforts in selling available room rates
Definition of RevPAR
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
and
Discussion Question
Utility of Occupancy percentage, ADR, and RevPAR?
Discussion Question Answer

Used
to project room revenues Demonstrate how room revenue is calculated Leads into Revenue Management
History of Yield Management
Airline industrys 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
Use of Yield Management
Goals of yield management
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)
maxim Revenue Management Solutions (MaximRMS) RevenueDASHBOARD OPERA Revenue Management

Revenue Manager
Reports to general manager Works closely with marketing and sales department Consults with front office manager Job duties refer to job listing (p. 171)
Components of Revenue Management
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)
Revenue Realized
Number of Rooms Sold x Actual Rate
Revenue Potential
Number of Rooms Available for Sale x Rack Rate Yield = Revenue Realized (# Rooms Sold x ADR)
Revenue Potential (# Rooms Available x Rack Rate)
Components of Revenue Management (contd.)
Yield = Revenue Realized (# Rooms Sold x ADR)
Revenue Potential (# Rooms Available x Rack Rate)
See p. 172 in text for demonstration of Yield formula
Compare and contrast the concepts of yield and occupancy percentage (refer to Tables 6-1) p. 172 and (6-2) p.173
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!
Strategies
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 Verrets 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 Copyright 2007 by John Wiley & Sons,and Inc. All rights reserved sales department, web site) p. 174
Low
Forecasting
Importance of daily accuracy in forecasting.
Block-Out Periods
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
Automated Systems and Procedures
Discuss the importance of using computers and standard operating procedures when using yield management Discuss the importance of training to use a yield management Copyright 2007 by John Wiley & system Sons, Inc. All rights reserved
Channel Management
Reservation Channels
Central Reservations GDS Third-party reservation system Toll-free phone reservation Travel Agent
Rebecca Olivers article pp. 176-177
Managing the Channels
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
Feedback
Discuss the importance of feedback on turn-away business in a yield management system (refer to Table 6-4; p. 177) = Dollars Lost
Management Challenges In Using Revenue Management

Alienation of Customers Minimum stay requirements Price gouging
Considerations for Food and Beverage Sales
Review Table 6-5 p.

178
Applications of Revenue Management

p. 179
Scenarios #1 Determine Yield Scenario #2 Homecoming Weekend

Scenario #3 Governors Conference vs. Jazz Weekend

Yield Management

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Chapter 6 Revenue Management

Chapter 6 Focus Points

Review Definition of Occupancy Percentage

Occupancy Percentage - reveals the success of a

Number of Guests Number of Rooms Sold x 100 Number of Rooms Sold

Definition of Average Daily Rate ADR

A measure of the hotels staff efforts in selling available room rates

RevPAR ability of a hotel to produce income

Discussion Question Answer

History of Yield Management

Use of Yield Management

Goals of yield management

Discuss yield management software example in chapter (p. 170-171)

maxim Revenue Management Solutions (MaximRMS) RevenueDASHBOARD OPERA Revenue Management

Components of Revenue Management

Components of Revenue Management (contd.)

Yield = Revenue Realized (# Rooms Sold x ADR)

Revenue Potential (# Rooms Available x Rack Rate)

See p. 172 in text for demonstration of Yield formula

Optimal Occupancy and Optimal Rate

Importance of daily accuracy in forecasting.

Automated Systems and Procedures

Managing the Channels

Management Challenges In Using Revenue Management

Considerations for Food and Beverage Sales

Review Table 6-5 p.

Applications of Revenue Management

Scenarios #1 Determine Yield Scenario #2 Homecoming Weekend

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