A brief introduction to the basic concepts of Revenue Management, in simple words, made for students of the final year in Hospitality Education.

1. Revenue Management and Revenue Strategy
(Guidance for the students in the Final Semester)
Revenue and yield management are the topics in the final year of any
hospitality course. It is confusing to many students, simply because of the so
much jargon (technical terms used by an Industry) employed, to express it,
define it and explain it. It also uses Maths and Statistics, which frightens the
students from Humanities stream.
So, I would first like to give a simplified concept, and then go on to give a more
detailed presentation in the next videos.
Let us start!
First, think of the answer to this question.
Why would anyone like to open and run a business?
I did not say an NGO. Just a simple business!
You all know the answer. It is profit.
Attach this word forever, to the idea of revenue management in your mind,
because that is an overall larger picture, of a really complicated story.
Hotel is a unique business. If it does not sell the rooms today, the income is
lost forever. A hotel also can not welcome all types of guests. Only those who

2. can pay, and fulfil their needs from the services offered by the hotel, are
welcome.
Let me now quote a definition of revenue management that you will easily find
in any Google search.
"Revenue management is selling the right room, to the right customer, at the
right time, at the right price, and through the right distribution channel."
But why do we need to do that?
For maximum profit, of course! However, I would like to use a more suitable
term, which is optimum profit, from the hotel business.
Let us further decode this need of revenue optimization, to get a clearer
understanding.
Right customer: All customers are not the same. Some are more
profitable overall, and they are the right customers.
Right room: Accommodation that best serves the needs of the travellers,
in terms of the purpose of travel, is the right room. If it is also priced higher, it
will be so much better.
Right price: Charge as high a rate as possible, but without seeming to be
robbing your customer! This point we would later discuss under ethics.
Here comes the next question. How can you charge high rates during low
demand period?

3. During off season, we charge as high as the customer can bear to pay, but
not lower than the "lose it" rate.
"Lose it'' rate is the price point at which, a hotel would spend more on the
guest, and earn less from them. In that situation, it is better to keep the room
vacant. What do you say?
Right time: Buyers and sellers have always tried to bargain, so as to
maximize their individual gains, or value. When demand is more in a market,
the seller has an upper hand. In times of low demand, the buyer is the king!
So, right time for a Hotel would be when the customer is under pressure
of getting a confirmed reservation. Naturally, any traveller is most anxious
when the time is nearer to the day of the tourist's arrival, and the peak of
nervousness would be "today".
Walk-In guests pay the highest price, and don't complain much either!
Right channel: Hotel sells its rooms through many channels, but the most
important ones are;
Hotels own website.
Online Travel Agencies, OTA.
Global Distribution System, GDS.
&, Central Reservation System, CRS.
Every channel requires the hotel to spend some money. The channel with
the least "cost of acquisition'', (now that is an example of revenue
management jargon which confuses students), is the right channel.

4. Cost of acquisition is the commission, and the marketing expenses that a
hotel has to pay, in getting 1 guest in the room.
It is very easy to see, that the direct bookings to the hotel, and the
reservations made on a hotel's own website, would require no commission,
and need less expenses.
So that should be the best channel?
But these days, travellers love the convenience of making all the travel
related arrangements, on a popular OTA. So choosing the right channel isn't
that simple!
To conclude this presentation, I would request you to remember these two
sayings, which best define the mindset of a smart revenue manager.
"Make hay while Sun shines."
"Something is better than nothing."
I am sure you have heard these sayings before, and you also understand
their connection with this situation.
Stay tuned! We will have more on this shortly.
Thank you for reading till the very end. You are a sincere student, and you will
surely succeed in your career. Hopefully, you have also realized the greatest
responsibility, you shall have as a future manager.

5. Best of luck.
Presented by- Praveen Jha
Senior Lecturer,
Institute of Hotel Management, Hajipur (Patna) Bihar