Yield revenue 101


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by Sanjeev Chainani

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Yield revenue 101

  1. 1. Yield/Revenue Management 101 The goal of this presentation is to understand the terms and processes involved in Revenue and Yield Management.
  2. 2. Lesson Objectives <ul><li>After completion of this lesson the learner will be able to : </li></ul><ul><li>Define the terms associated with revenue management </li></ul><ul><li>Explain the process of maximizing revenue and how revenue management can help achieve this </li></ul><ul><li>Describe the role of the Global Distribution System in Revenue management </li></ul><ul><li>Define ways to measure Revenue management success </li></ul>
  3. 3. Revenue/Yield Management Integrated control of CAPACITY and PRICE
  4. 4. So what does that definition actually mean? <ul><li>Selling the right product </li></ul><ul><ul><li>Correct brand, room type, and/or meeting space </li></ul></ul><ul><li>To the right customer </li></ul><ul><ul><li>Transient or Group/Business or Pleasure </li></ul></ul><ul><li>At the right time </li></ul><ul><ul><li>The booking window of how far out guests book </li></ul></ul><ul><li>For the right price </li></ul><ul><ul><li>Properly position rates for each segment </li></ul></ul>
  5. 5. Maximize Revenue “ Maximize Revenue” can be broken down into three main activities: Maximize Revenue Pricing Strategy How do we price our product? Inventory Management How many rooms are made available at each price point? Selling Strategy How do we sell our product?
  6. 6. <ul><li>Price the product (rooms) appropriately based on seasonality (changes in customer mix, demand, etc.) </li></ul><ul><li>Focus on forecasted demand for the rooms and develop restriction and authorization strategies that will capture the highest possible revenue from that demand. </li></ul><ul><li>Implement selling strategies that make sense to the customer, support the brand’s selling philosophies, and maximize the property’s revenue. </li></ul>So, how does Revenue Management help to accomplish the goal of maximizing revenues?
  7. 7. Pricing Strategy <ul><li>The Customer </li></ul><ul><li>The Property </li></ul><ul><li>The Market </li></ul>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.
  8. 8. Inventory Management Translating the customer selection process into restrictions Stay controls are used to FILTER out EXCESS DEMAND. 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. Block/Group Only Allotments/Tally Close inventory/GTD Maximum Stay Close to Arrival Minimum Stay
  9. 9. Demand <ul><li>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. </li></ul><ul><li>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. </li></ul>The goal of Revenue Management is to capture the most room revenue from existing demand, thus maximizing revenue. You may ask yourself, what is demand?
  10. 10. Filter or Wall? <ul><li>Rate Controls </li></ul><ul><li>Closed to Arrival </li></ul><ul><li>Minimum Stay </li></ul><ul><li>Maximum Stay </li></ul><ul><li>Close All-Block-Zero out inventory </li></ul><ul><li>Allotments </li></ul><ul><li>Block Only-Group Only </li></ul><ul><li>Close 6pm/4pm </li></ul>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. 11. How do we maintain rate integrity and restrictions when all those other booking engines (Internet) are discount options for our customers? GLOBAL DISTRIBUTION SYSTEM
  12. 13. The GDS Marketplace <ul><li>GDS represents 19% of Lodging Room Revenue </li></ul><ul><li>GDS is the preferred booking vehicle of travel agencies </li></ul><ul><ul><li>80% of all reservations made by agents for Marriott brands are booked via GDS </li></ul></ul><ul><li>Marriott owns the highest market share in the GDS channel at 20% </li></ul><ul><li>GDS is the 2nd largest source of reservations for Marriott Lodging </li></ul>
  13. 14. Are We Alone? <ul><li>Airline seats - once the aircraft departs with an empty seat, there is no longer a revenue opportunity associated with that seat. </li></ul><ul><li>Travel Industry </li></ul><ul><li>Car Rental Agency </li></ul><ul><li>Media Advertising </li></ul><ul><li>Hobbies - Golf, Horse Riding etc. </li></ul><ul><li>PRODUCE </li></ul>
  14. 15. MEASUREMENT OF SUCCESS <ul><li>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 </li></ul>
  15. 16. How do WE measure our Revenue Management success? <ul><li>Occupancy? </li></ul><ul><li>Avg. Daily Rate? </li></ul><ul><li>Accurate Forecasting? </li></ul><ul><li>Revenue? </li></ul><ul><li>Exceeding budget? </li></ul><ul><li>Revenue per Available Room? </li></ul>
  16. 17. RevPAR! <ul><li>Occupancy is an incomplete measurement because it fails to account for lost revenue due to varying room rates. </li></ul><ul><li>ADR is an incomplete measurement because it fails to account for lost revenue due to unsold rooms. </li></ul><ul><li>RevPAR blends both occupancy and ADR </li></ul>
  17. 18. Which hotel is best utilizing Revenue Management Techniques? 68% $69.00 Hotel 3 65% $74.75 Hotel 2 55% $81.54 Hotel 1 OCC % ADR
  18. 19. All the same! $44.85 65% $69.00 Hotel #3 $44.85 65% $74.75 Hotel #2 $44.85 55% $81.54 Hotel #1 RevPAR OCC % ADR