revenue management

1. PRESENTATION ON
PRESENTED BY:
SHIVAM GAUR

2. OUTLINE OF
PRESENTATION
 INTRODUCTION
 DEFINITION
 PRE-CONDITIONS OF REVENUE
MANAGEMENT
 GOALS OF REVENUE MANAGEMENT
 SECTORS WHERE THE CONCEPT IS APPLIED
 REVENUE MANGEMENT LEVERS
 CRITICAL FACTORS IN REVENUE
MANGEMENT
 REVENUE MANGEMENT CYCLE/PROCESS
 BENEFITS OF REVENUE MANAGEMENT
 CONCLUSION

3. INTRODUCTION
 The concept of R.M originated in the airline
industry(America).
 R.M is based on demand and supply factor.
 The prices tend to rise when demand exceeds
supply.
 The hotel industry’s focus is shifting from high
volume booking to high profit booking.

4. DEFINITION OF R.M/Y.M
It is a technique used to maximize room
revenue.
R.M is selling the right product to the
right customer at the right time for the
right price.
In other words it is a process of
examining and factoring consumer
behavior to achieve max. amount of
profit from perishable inventories(rooms).

5. PRE-CONDITIONS OF R.M:
Product is perishable
Can be sold in advance
Capacity is limited
Market can be segmented
Variable cost are low
Demand varies

6. HOTEL INDUSTRY
APPLICATIONS
 The commodity that the hotel sells is time in a
given space, and if it is unsold, revenue is lost
forever.
 R.M is composed of a set of demand
forecasting techniques used to determine
whether room rates should be raised or
lowered, and whether a reservation should be
accepted or rejected in order to maximize
revenue.

7. GOALS OF R.M:
 The proper goal of a revenue management program is
not to increase average room rates. Neither is it to
increase average occupancy rates.
 Revenue management programs must focus on
maximizing the product of the two,
 Called as revPAR

8. GRAPH DEPICTING MAXIMUM REVENUE POINT

9. SECTORS WHERE R.M IS
APPLIED:
 Lodging
 Car rentals
 Cruise liners
 Railways
 Theatres
 Airlines
 Food and Beverages outlets
 Tourism industry

11. THE R.M LEVERS:
 PRICING-pricing should always be profit
oriented and as per the demands and needs
of guests, pricing may vary as per the
segment. Price fencing may also be used.
 INVENTORY- as rooms are perishable in
nature therefore different techniques should
be used to sell inventories such as discounted
rates, seasonal rates , overbooking etc. to
gain the revenue at right time.

13. CRITICAL FACTORS IN R.M:
1-CAPACITY MANAGEMENT:
 Helps in controlling and limiting supply.
 Balancing the risk of overselling.
 Determining how many walk-ins to accept during
the day of arrival.
2-DISCOUNT ALLOCATION:
 Involves restricting the time period and product
mix available at discounted rates.
 Limiting discounts by room type through
encouraging upselling.
 Focus on maximizing revenue in lean season.

14. 3- DURATION CONTROL:
 Places time barrier on accepting reservations
in order to protect sufficient space for multi-
day request.
 Using closed to arrival technique to restrict
and encouraging early checkouts for transient
guests.

15. THE R.M CYCLE/PROCESS
R.M
FORECASTING DEMAND
CONTROLLING
DEMAND
MONITORING DEMAND
OPTIMIZING
DEMAND

16. 1-FORECASTING DEMAND
 It is done through collection of data called as
forecasting data which includes:
 Historical data
 Booking pattern and pace
 Length of stay pattern
 Cancellations and No-shows pattern
 Estimation of unconstrained demand
 List of special events, MICE etc.

17. 2- OPTIMIZING DEMAND
 The optimization of demand is the brain of
any revenue management system, automated
or manual.
 This is the place where all of the information
is assimilated and analyzed in order to decide
which bookings to accept and which bookings
to reject.

18. 3-CONTROLLING DEMAND
 It means controlling the demand with respect to
capacity of hotel.
 To control demand length-of-stay may be
reduced and price may be increased.
4- MONITORING DEMAND
o It helps in comparison actual v/s estimated
demand.
o Judging the accuracy of forecast data.

19. BENEFITS OF R.M:
 Improved forecasting.
 Improved pricing and decision making
 Coordination between front office and sales
division increases.
 Identification of market segment.
 Determination of discounting activities.
 Establishment of value -based rate structure.