Chapter 13 Managing Front Office Operations HOT 333
- 1. Managing Front Office SQA I HOT 333
- 2. Revenue Management The concept of Revenue Management Measuring Revenue Elements of Revenue Management The Revenue Manager Using Revenue Management Revenue Management Software
- 4. Why Revenue Management Is a Better Performance Measure Precise measure of performance than either Occupancy Percentage or Average Daily Rate Evaluative tool allows to use potential as against actual revenue can be compared Use of specialty application. calculations can be performed quickly & accurately
- 5. Concept of Revenue Management Originated Airline Industry Lodging Car rental Cruise line Railroad Touring
- 6. Flexibility of Revenue Management Room rates could accurately be adjusted based upon demand of specific market segments Business travelers booking less than seven days prior to arrival Leisure travelers booking three to six months in advance of arrival Members of hotel’s frequent guest program Travelers making reservations over Internet Travelers making reservations at hotel’s website Travelers requiring car rentals, airline reservations, & other components of travel package
- 7. Key to Successful Revenue Management To sell right product Guestrooms, banquets, ancillary services To right customer Business, leisure, convention, or government guest On right day Weekday, weekend For right price Rack rate, corporate rate, group rate, government rate, or discount rate
- 8. Revenue Management Based on Supply & Demand, Prices tend to rise when demand exceeds supply, which is why revenue management seeks to increase revenue by focusing on high-profit bookings instead of high-volume bookings to high-profit bookings As a result: By increasing bookings on low-demand days & by selling rooms at higher room rates on high-demand days, can improve profitability In general, room rates should be higher (in order to maximize rate) when demand exceeds supply & lower (in order to increase occupancy) when supply exceeds demand
- 9. Critical Importance of Forecasting HMC, common problem fixed inventory of products & there is no way to recover time & revenue lost • Property they manage • Competitive market in which operates Managers need reliable information to base their forecasts To consider future events—or variables—that might affect business
- 10. Benefits of Revenue Management Improved forecasting Improved seasonal pricing & inventory decisions Identification of new market segments Identification of market segment demands Enhanced coordination between FO & Sales Determination of discounting activity Improved development of short-term & long-term business plans
- 11. Challenges in Revenue Management Different demand situations different tactics Each day separate situation Implement tactics suited to property • Guest • Market • Demand conditions
- 12. Methods of Revenue Management Capacity Management Discount Allocation Duration Control
- 13. Methods of Revenue Management Capacity Management Controlling & limiting room supply Selective Overbooking • Early Checkouts • Cancellations • No Shows • Walk-ins of day Varies with room type Influenced with competitors availability Group Attrition • Group History • Online Shopping • Business Sourcing
- 14. Methods of Revenue Management Discount Allocation • Restricts time period • Product mix (rooms) • Protect remaining rooms & sell on high price • Filling rooms otherwise remained unsold • Encourage upselling • Price Elastic • Small increase in price/ Drop in demand • Price Inelastic • Small increase in price/ No effect
- 15. Methods of Revenue Management Duration Control Places time constraints on accepting reservations Protect rooms for multi-day reservations Reject single night reservations Resorts, special days
- 16. Designed to measure achievement Yield Statistics Actual Revenue • Revenue from rooms sold Potential • Revenue if all rooms sold
- 17. Measuring Revenue 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 Formula 8: RevPAR Formula 9: Identical yields Formula 10: Equivalent occupancy Formula 11: Required non-room revenue per guest RevPAG & GOPPAR
- 18. Elements of Revenue Management Group room sales Transient room sales Other revenue opportunities Local & area-wide activities Special events
- 19. Group Room Sales Booking Data Booking Pace Anticipated Business Lead Time Displacement of Transient Business
- 20. Transient Room Sales Rooms sold to non group travelers Booked closer to arrival of group business Transient Business 2-3 weeks Revenue Management Ethics • Group Business 5-6 Months • Resort Group 1-2 years
- 21. Other Revenue Opportunities Non-Room Revenues • Meetings, Banquets, Recreational & Spa Total Package • Rooms, Meals, Meetings, Rentals etc. Focus on rooms & others mix Collective Profitability from all departments
- 22. Local & Area-Wide Activities Displacement of guest • Convention • Transient • Smaller groups Awareness of market and surroundings • Activities • Wedding • Events Cancellations at competitor creates a vacuum Ethics & business practice
- 23. Special Events Holidays, Concerts, Festivals & Sporting Events Advantage from demand enhancing activity Restricting Room Rate Discounts Minimum length of stay Be careful over alienate frequent travelers
- 24. Fair Market Share Performance in relation with the competition Rates being offered are competitive Hotel is getting a fair share of available business
- 25. The Revenue Manager Cost Effective & Profitable Part of Financial Success
- 26. Revenue Manager Skills and Qualities Operational skills Analytical skills Strategic skills Organizing skills Communications skills Good listening skills Team-building skills Training skills Patience Creativity Cooperativeness Flexibility
- 27. The Revenue Meeting Ongoing process High or Low Occupancy Part of Hotel’s approach to business Regular & appropriate decisions Opposite to Short Term Track trends & guest demand, months/years before Other departments as part of Team Revenue Management Plan
- 28. Revenue Management Plan No of Guest to help F & B preparations Rate Changes & Adaptations for selling strategy Occupancy percentages for Housekeeping & so Review forecast, weekly/monthly Review previous data, week/month Review booking pace Review old business Present new business Discuss last minute adjustments Interdepartmental communication plan 30-60 Days outlook Current channel distributions Review 30-60-90- 120 days Upcoming critical periods
- 29. 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 & cancellation policies Raise rates to be consistent with competitors Consider rate raise for packages
- 30. Low-Demand Tactics Sell value & benefits Offer packages Keep discount categories open Encourage upgrades Offer stay- sensitive price incentives Remove stay restrictions Involve your staff
- 31. Implementing Revenue Strategies Hurdle rate Minimum length of stay Close to arrival Sell- through
- 32. Revenue Strategy Hurdle Rate Set lowest rate for day Rates below not applicable Fluctuate day by day Pricing strategy to maximize revenue Incentive based Minimum Length Stay Specified no of nights Even occupancy Peak period High Occupancy Special Event Additional business Avoid losing guest
- 33. Revenue Strategy Close to arrival Arrival date should be before closing Stay through high season Additional arrivals on date will not be accepted Denial should be recorded Sell Through Minimum length of stay Strategy to overbook peak day Focus no show, early departure , cancellations
- 34. Revenue Management Software Continuous monitoring Consistency Information availability Performance tracking Market Segment Calendar/Booking Graph Future arrival dates status report Single arrival date history report Weekly Recap Room Statistics tracking sheet
- 35. ? Any Questions