HPC09: SUPPLY CHAIN MANAGEMENT IN HOSPITALITY INDUSTRY

Revenue Management
Importance of Revenue Management
Revenue Management Strategies
Hotel Pricing Strategies

Submitted by:
PEACHES ANNE A. DIGMA
BSHM – 3 JA

Submitted to:
MANILYN G. ZUBIETA
Instructor, HPC09
 April 27, 2023

Objectives
At the end of my report my classmates should be able to:
1. Define the Revenue Management
2. Realize the importance of revenue management
3. Identify and explain the main steps in Revenue Management
4. Know the Revenue Management Strategies
5. Understand the hotel pricing strategies

Definition of Terms

● Cross-selling - refers to the act of promoting and selling supplementary products

or services to customers who have already made a purchase (Adam Hayes,
2022)
● Demand - refers to an economic idea that concerns a consumer's inclination to
buy goods and services, and their readiness to pay a particular price for them
(The Investopedia Team, 2022)
● Efficiency - the ability to produce the highest amount of beneficial output while
minimizing the use of energy, fuel, effort, or other resources. (Cambridge
Dictionary)
● Forecasting - a method that leverages past data to make educated predictions
that can anticipate the direction of future patterns. (Alicia Tuovila, 2022)
● Iterating - means to repeat a process or cycle with the goal of making
improvements or achieving a desired outcome. (Karin Levy, 2021)
● Occupancy - the process, status, or situation of occupying or renting a space, or
residing and settling in or on something. (Dictionary.com)
 ● Optimization -
the act of enhancing the efficiency of a trading system by modifying the technical
analysis variables used in the process. (Lucas Downey, 2022)
● Revenue - the money generated from normal business operations, calculated as
the average sales price times the number of units sold. (Adam Hayes, 2023)
● Segmentation - a marketing concept that involves grouping potential customers
into segments or categories based on shared needs and similar responses to
marketing efforts. (Evan Tarver, 2023)
● Supply - a basic principle in economics that defines the complete quantity of a
particular product or service that is accessible to consumers. (Will Kenton, 2023)
● Upselling - a selling strategy that motivates customers to spend additional
money by purchasing a superior or deluxe edition of the product they initially
planned to buy. (Shopify Staff, 2022)

Summary of the Report

Revenue - refers to the income that a company earns from its regular business
activities. It is computed by multiplying the average selling price per unit with the total
number of units sold. Revenue is the highest figure in a company's financial statements
and represents the gross income, from which all the costs are deducted to determine
the net income.

Formula:
Revenue = Price per unit x Number of units sold

Revenue Management the practice of using data analysis and pricing strategies
to make informed decisions about inventory and pricing with the goal of maximizing
revenue and profitability, commonly used in industries such as airlines, hotels, car
rentals, and online marketplaces.
Revenue management
has been called the art and science of "Selling the right product to the right customer for
the right price at the right time through the right channels". The 5 main steps or
process of revenue management are Gathering information (data collection) is the
process of collecting and compiling relevant data that is used in revenue management.
This involves gathering data about customer behavior, market trends, and other factors
that can affect demand and pricing decisions, Slicing and dicing (segmentation) also
known as segmentation, is the process of dividing data into smaller, more specific
groups to identify patterns and trends that can help inform revenue management
decisions, Seeing the future (forecasting) involves using historical data and trends to
predict future demand and revenue, which helps in making informed decisions about
pricing and inventory management, Planning and executing (decisionmaking and
optimization) Planning and executing in revenue management involves making
informed decisions based on the data collected and the forecasting done earlier. This
includes setting prices, managing inventory, and deciding on promotional offers to
maximize revenue, and lastly Iterating (dynamic reevaluation) Iterating in revenue
management refers to the continuous process of reevaluating and adjusting strategies
based on the changing market conditions and performance results.

IMPORTANCE OF REVENUE MANAGEMENT

Maximizing revenue: By optimizing pricing, inventory, and distribution
strategies, revenue management helps businesses maximize revenue and profits.
Balancing supply and demand: Revenue management helps businesses balance
supply and demand by adjusting prices and inventory levels to match demand patterns.
Improving efficiency: Revenue management allows businesses to make data-driven
decisions that improve operational efficiency, leading to increased profitability.
Enhancing customer satisfaction: By tailoring pricing and distribution strategies to
different customer segments, revenue management helps businesses provide a more
personalized and satisfying
customer experience. Staying competitive: Revenue management allows businesses
to stay competitive by pricing their products or services appropriately relative to their
competitors. Forecasting demand: Revenue management enables businesses to
forecast demand and adjust capacity accordingly, ensuring that they are maximizing
revenue potential.

REVENUE MANAGEMENT STRATEGIES

• Pricing strategy is a revenue management strategy that involves setting the right
price for a product or service to maximize revenue and profit. This strategy takes into
account factors such as market demand, competition, production costs, and
customer behavior.
• Establish Market Segments involves identifying and categorizing potential
customers into different groups or segments based on their needs, preferences, and
characteristics. By creating market segments, businesses can better understand
their customers and tailor their products or services to meet the specific needs of
each group. Market segments may be based on factors such as age, gender,
location, interests, investment, and more.
• Distribution channel controls is a revenue management strategy that involves
managing the distribution and sales channels through which products or services are
sold to customers. This includes selecting the most effective distribution channels,
such as online marketplaces, direct sales, or retail stores, and optimizing their
performance. The strategy also involves monitoring sales performance metrics such
as inventory levels, sales volume, and customer feedback to ensure that the
channels are meeting business goals
• Forecasting Strategies is a revenue management strategy that involves predicting
customer demand for products or services in the future. This includes analyzing
historical data, market trends, and customer behavior to identify patterns and
 forecast future demand
accurately. The strategy helps businesses to optimize pricing and inventory levels
and to allocate resources effectively based on anticipated demand. Forecasting
strategies can be applied to various aspects of a business, including sales,
production, and procurement, to help businesses operate more efficiently and
effectively.
• Promotions and discounts are revenue management strategies that involve
offering customers reduced prices or other incentives to encourage them to
purchase more or

to purchase more frequently. These strategies can be implemented through various

channels, such as email marketing, social media, and advertising. While promotions
and discounts can be effective in increasing revenue, they should be used
strategically to avoid eroding profit margins.
• Focus on Mobile optimization is a revenue management strategy that involves
optimizing a business's website or mobile app for mobile devices to improve user
experience and increase revenue. By improving the mobile user experience,
businesses can increase customer engagement, reduce bounce rates, and
ultimately increase conversions and revenue. Studies show that mobile sites that
load quickly and are easy to use are more likely to generate higher revenue.

HOTEL PRICING STRATEGIES

Occupancy-based pricing a pricing strategy where the price of a product or service is
based on the level of demand or occupancy. In other words, as the demand or
occupancy of the product or service increases, the price also increases, and vice versa.
Forecast based-pricing - a pricing strategy where the price of a product or service is
based on the anticipated future demand or supply. In other words, the price is adjusted
based on the forecasted market conditions and trends.
Market competition-
based pricing - a pricing strategy where the price of a product or service is based on
the prices of competitors in the market. In other words, the price is adjusted based on
what competitors are charging for similar products or services. Segment-based
pricing - a pricing strategy that involves setting different prices for different customer
groups or market segments based on their unique characteristics, needs, and
willingness to pay.
Length of stay-based pricing - a pricing strategy where the price of a product or
service is based on the length of time a customer intends to use it. In other words,
prices are adjusted based on the duration of the customer's stay or use of the product or
service.

Guest type-based pricing - a pricing strategy that involves setting different prices for
different types of customers based on their characteristics, such as age, income level,
or status.
Cancellation policy-based pricing - adjusts the price of a product or service based on
the flexibility of the cancellation policy attached to it, often used in the travel and
hospitality industry to balance revenue and risk.
Upselling-based pricing - Upselling-based pricing is a strategy where a higher-priced
product or service is offered to a customer as an upgrade or add-on to their original
purchase, aimed at increasing revenue by offering additional value while still generating
profit.
Cross-selling-based pricing - refers to the practice of offering additional products or
services to a customer who has already made a purchase or shown interest in a
product, with the aim of increasing the customer's overall spend and enhancing their
experience. Loyal customer based pricing - a pricing strategy that offers special
discounts or pricing to customers who have a history of repeat business or loyalty to a
particular brand, aimed at
incentivizing continued loyalty and encouraging customers to make additional
purchases.

Conclusion
Revenue management is a vital process for any business looking to optimize its
overall income and drive growth. Its importance lies in its ability to help businesses
make informed decisions about pricing, inventory management, and customer
segmentation, which can increase profitability. Effective revenue management
strategies, including dynamic pricing, segmented pricing, and revenue maximization,
can help businesses maximize revenue. In the hospitality industry, revenue
management plays a critical role in hotel pricing strategies, helping hotels set the right
prices to maximize occupancy rates and revenue.

Personal Insight from the topic:

Revenue management is a critical aspect of any business, particularly in the
service industry. It involves setting the right price, at the right time, and for the right
market segment to optimize overall income. The importance of revenue management
lies in its ability to help businesses make effective business planning decisions that can
increase profitability and drive growth. Effective revenue management strategies involve
analyzing market trends and customer behavior to determine the optimal pricing and
inventory management strategies. This can include dynamic pricing, which adjusts
prices based on demand, or segmented pricing, which involves setting different prices
for different customer segments. Other strategies may include promotional pricing,
bundling, and revenue maximization through upselling and cross-selling.
In the hospitality industry, revenue management plays a crucial role in hotel pricing
strategies. Hotels must set the right prices to maximize occupancy rates and revenue.
Revenue management strategies that hotels use include monitoring competitor prices,
adjusting prices based on demand, forecasting demand, and offering dynamic pricing.
These strategies can help hotels
maximize revenue while maintaining optimal occupancy rates.

References:
(2022). Retrieved from Revenue Management playbook: Definition, Strategies, and
software.
Beaver, S. (2022). Retrieved from Revenue Management Defined.
Hayes, A. (2023). What is Revenue? Definition, Formula, Calculation, and Example.
McCormick, M. (2017). Revenue Management Strategies You Can Use Today.
Team, e. E. (2022). 10 Powerful Hotel Pricing Strategies to Implement in 2023.
Submitted by: Noted by:

Peaches Anne A. Digma Manilyn G. Zubieta

BSHM – 3 JA Students HPC09 Instructor