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Yield/Revenue Management 101

Yield/Revenue Management 101 . The goal of this presentation is to understand the terms and processes involved in Revenue and Yield Management. Lesson Objectives. After completion of this lesson the learner will be able to : Define the terms associated with revenue management

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Yield/Revenue Management 101

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  1. Yield/Revenue Management 101 The goal of this presentation is to understand the terms and processes involved in Revenue and Yield Management.

  2. Lesson Objectives After completion of this lesson the learner will be able to : • Define the terms associated with revenue management • Explain the process of maximizing revenue and how revenue management can help achieve this • Describe the role of the Global Distribution System in Revenue management • Define ways to measure Revenue management success

  3. Revenue/Yield Management Integrated control of CAPACITY and PRICE

  4. So what does that definition actually mean? • Selling the right product • Correct brand, room type, and/or meeting space • To the right customer • Transient or Group/Business or Pleasure • At the right time • The booking window of how far out guests book • For the right price • Properly position rates for each segment

  5. Maximize Revenue “Maximize Revenue” can be broken down into three main activities:

  6. So, how does Revenue Management help to accomplish the goal of maximizing revenues? • Price the product (rooms) appropriately based on seasonality (changes in customer mix, demand, etc.) • Focus on forecasted demand for the rooms and develop restriction and authorization strategies that will capture the highest possible revenue from that demand. • Implement selling strategies that make sense to the customer, support the brand’s selling philosophies, and maximize the property’s revenue.

  7. Pricing Strategy Pricing is the process of determining the rates that will ultimately define the product in the marketplace. It is a long-term strategic plan designed to target specific customers and offer them the best possible price/value for their money. The customers’ willingness to pay a certain rate is directly related to the “perceived value” of the room. When establishing a pricing structure, there are three factors to consider. • The Customer • The Property • The Market

  8. Inventory ManagementTranslating the customer selection process into restrictions Stay controls are used to FILTER out EXCESSDEMAND. The timing of your revenue management decisions in conjunction with other factors such as arrival/departure patterns, average length of stay, etc. will dictate which control to use.

  9. Demand The goal of Revenue Management is to capture the most room revenue from existing demand, thus maximizing revenue. • Demand: is defined as all of the people that want to stay at the property (demand is not constrained/impacted by physical capacity, restrictions, or availability of rooms. • Demand is calculated by: Rooms sold PLUS demand turndowns. Demand turndowns are rooms that were turned away due to restrictions or lack of available inventory. You may ask yourself, what is demand?

  10. Rate Controls Closed to Arrival Minimum Stay Maximum Stay Close All-Block-Zero out inventory Allotments Block Only-Group Only Close 6pm/4pm Filter or Wall? Stay controls act like filters, holding back some transient business while letting other business to pass through. Other controls are like a wall – stopping transient business all together. Identify if the following controls are filters or walls

  11. GLOBAL DISTRIBUTION SYSTEM How do we maintain rate integrity and restrictions when all those other booking engines (Internet) are discount options for our customers?

  12. The GDS Marketplace • GDS represents 19% of Lodging Room Revenue • GDS is the preferred booking vehicle of travel agencies • 80% of all reservations made by agents for Marriott brands are booked via GDS • Marriott owns the highest market share in the GDS channel at 20% • GDS is the 2nd largest source of reservations for Marriott Lodging

  13. Airline seats - once the aircraft departs with an empty seat, there is no longer a revenue opportunity associated with that seat. Travel Industry Car Rental Agency Media Advertising Hobbies - Golf, Horse Riding etc. PRODUCE Are We Alone?

  14. MEASUREMENT OF SUCCESS • Once the appropriate actions have been effectively implemented, they must be measured for their success. The cornerstone of measurement for any effective Revenue Management strategy is to focus on RevPAR

  15. How do WE measure our Revenue Management success? • Occupancy? • Avg. Daily Rate? • Accurate Forecasting? • Revenue? • Exceeding budget? • Revenue per Available Room?

  16. RevPAR! • Occupancy is an incomplete measurement because it fails to account for lost revenue due to varying room rates. • ADR is an incomplete measurement because it fails to account for lost revenue due to unsold rooms. • RevPAR blends both occupancy and ADR

  17. Which hotel is best utilizing Revenue ManagementTechniques?

  18. All the same!

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