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Introduction to
  Hotel Revenue
   Management


          Earn More
by Selling the Same




   Presented by Tomeu Pons
   7 May 2013 | Miami Beach, FL
Introduction to Revenue Management
 Presentation




                  The main objective of this seminar is to understand the purpose
                  of revenue management in both technological and commercial
                  terms.


                  With this information, a hotel can evaluate, develop and optimize
                  its pricing strategy with the goal of maximizing profits.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   2
Introduction to Revenue Management
 Presentation




                                                 Professor: Tomeu Pons tomeupons@gmail.com

                                                 Collaborating Professor – Turisme Sant Ignasi TSI, Fundación ESADE
                                                                                                    Fundació
                                                 Tourism Education Manager – Cibernarium, Barcelona Activa
                                                 Collaborating Professor – University of Barcelona

                                                                                     E-
                                                 Educated in Hospitality, Marketing, E-commerce and IT Systems in
                                                        Hotelerí
                                                 Escola Hotelería UIB, ESADE, La Salle URL and UPC

                                                 Chief Operating Office – Flamingo Hotelier

                                                 Previously, Consultant ,Director of Marketing and CEO in companies
                                                                                                          companies
                                                 such as The Perfect Hotels, Sercotel, Hotusa and SAP




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   3
Introduction to Revenue Management
 Agenda




                            •   Definition
                            •   Price
                            •   Effects on a hotel
                            •   Distribution: direct and indirect
                            •   When it is used
                            •   Factors
                            •   Tactics
                            •   Calculating prices
                            •   Reporting, statistics and tools
                            •   Exercises
                            •   Glossary
                            •   Exam
                            •   Notes




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   4
Introduction to Revenue Management
 Definition


               Revenue Management is a commercial management technique
               that helps us to sell the right product at the right moment at the
               right price to the right client.




               Wikipedia: http://en.wikipedia.org/wiki/Revenue_management




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   5
Introduction to Revenue Management
 Why use RM?


               Revenue Management is a strategy we can use in response to:

               •   Increased competition
               •   Increase in channels of distribution
               •   Transparency in prices
               •   Increase in special promotions and discounts
               •   Decrease in expected response time to clients
               •   80% of sales are influenced by online channels




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   6
Introduction to Revenue Management
 Definition


               Revenue Management is a method of managing sales of hotel
               inventory by applying yield management techniques


               Revenue Management:
               Commercial management technique that helps us sell the right
               product at the right moment at the right price to the right client


               Yield:
               The techniques, formulas and strategies hotels use to manage
               inventory, price and sales policies to maximize revenue
               generated from the sale of this inventory




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   7
Introduction to Revenue Management
 Basic Elements of Revenue Management


               Basic elements of Revenue Management used to manage inventory:

               •   Historical data – statistics, demand and trends
               •   Forecasts
               •   Price management tools
               •   Overall strategy
               •   Pricing policies


               With the above, we can address:

               • Fixed and perishable inventory
               • Anticipated sales
               • Customer segmentation




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   8
Introduction to Revenue Management
 Improve RevPAR and GopPAR



                                                                  RevPAR
                                                                  RevPAR
                                                                  GopPAR
                                                                  GopPAR




                                                                                                                   Increase
                                                                                                                   Increase
                           Increase
                           Increase                                                                                  your
                                                                                                                     your
                          occupancy
                          occupancy                                                                                 Rooms
                                                                                                                    Rooms
                                                                                                                     ADR
                                                                                                                      ADR



                                                                  Maximize
                                                                  Maximize
                                                                  Revenue
                                                                   Revenue
                                                                  and profit
                                                                  and profit



Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   9
Introduction to Revenue Management
 Desired equilibrium in response to a changing market




                                                    Sell at                                    Sell at
                                                  high prices                                low prices




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   10
Introduction to Revenue Management
 The Customer


               The customer is the most important factor in determining price.

               Each client is different and has their own motivation:

               •   Different motives
               •   Different expectations
               •   Willing to pay different prices
               •   Interested in different products

               To understand this environment we must ‘segment’ the market,
               and for each of these segments we must adapt:

               •   Interested in different products
               •   Pricing
               •   Reservation terms
               •   Marketing along the path-to-purchase



Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   11
Introduction to Revenue Management
 The Product


               The product is another of the key factors.

               What is it about our product that drives sales?
               • Hotel
               • Destination
               • Experience
               • Rooms
               • Services

               Once we determine this, we can effectively develop our product:

               Create additional room types?
               Create a range of price points?




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   12
Introduction to Revenue Management
 The Price


               Although the price seems to be a lever we control, this is
               completely false:

               -   Price is determined by demand
               -   Prices rise and prices fall
               -   High seasons and low seasons
               -   Years with low/no demand
               -   Channels with low/no demand
               -   Competition, local and international affects demand

               However, there are techniques and factors that enable us to
               increase prices.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   13
Introduction to Revenue Management
 The Moment of the Reservation


               The moment of reservation is a key element in the management
               of prices and quite often it isn’t take seriously enough

               It’s an important moment for the customer just as much as it is
               an important moment for the hotel. Both must work together in
               the same way.

               Many techniques exist for both players.
               Forecasts based on historical data help us a great deal.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   14
Introduction to Revenue Management




                                                           How it was born …




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   15
Introduction to Revenue Management
 Where it was born, how and what need it met…




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   16
Introduction to Revenue Management
 Where it was born, how and what need to it meet


               These sales techniques were developed during the middle of the
               20th century by American companies.

               Once their information systems were computerized, they were
               able to apply these methods effectively.

               Companies could sell airplane tickets at different prices. They
               realized that different clients, at different times, with different
               motivations, were willing to pay different prices.

               To be able to ‘predict’ how much clients were willing to pay for a
               ticket, they developed ‘Yield’ techniques that allowed them to
               fixed these prices. It was important for them to computerize and
               collect information about supply and demand.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   17
Introduction to Revenue Management
  An example




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   18
Introduction to Revenue Management
 Variability of industry pricing




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   19
Introduction to Revenue Management
 Evolution of Tourism Pricing Management


               History of Pricing

               The total acceptance and integration of the Internet as a major
               sales channel changed the way hotels price their inventory:

               2003 – Some Majors changed to dynamic pricing
               2004 – Fixed Consortia pricing disappeared
               2005 – Decrease number of Categories and continued change to
                      dynamic pricing
               2006 – Some corporate accounts are already dynamic
               2007 – BAR is implemented completely




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   20
Introduction to Revenue Management
 Definition


               Pricing

               Techniques to determine prices are developed in the heart of
               each company. Setting prices can vary depending on the strategy
               of the company.

               The main factors in setting prices are:

                                                •    Production costs
                                                •    Market
                                                •    Competition
                                                •    Demand
                                                •    Product positioning




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   21
Introduction to Revenue Management
  Pricing


                                                   Where do prices come from?
                                                 What are customers willing to pay?


                                                                                                                                 $

                                                                                                                                 $

                                                                                                                                 $

                                                                                                                                 $




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons       22
Introduction to Revenue Management
 Pricing


               Techniques to set the prices of a good or a service…

               Setting of prices can focus on anything from cost of production to
               consumer demand.

               From the point-of-view of marketing, an ‘efficient price’ is a price
               that is close to the maximum price a consumer is willing to pay.

               In economic terms, it is a price that transfers the most value
               obtained by the consumer to the producer.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   23
Introduction to Revenue Management
 Pricing – Where do prices come from?


               In the mind of the consumer, they are comparing different
               options (substitute products), taking into consideration their
               budget and the benefits of the purchase (e.g. pleasure).

               This determines, in their minds, the right price they’d pay.

               For a company to increase profitability from sales, they must
               know in each moment what is the approximate maximum price a
               customer is willing to pay for the product or service.

               To increase the consumers’ perceived value of our products and
               services, we must take in to account factors such as product,
               price, distribution and promotions.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   24
Introduction to Revenue Management
  Pricing – An Efficient Price


                    The efficient price is the maximum consumers are willing to
                    pay. Prices are influenced by multiple factors…

                    But they are only perceived as ‘the right price for me or not’




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   25
Introduction to Revenue Management




                         Now that we understand that prices are factors affected by
                         Now that we understand that prices are factors affected by
                               multiple variables and are only perceived as
                               multiple variables and are only perceived as
                                       ‘the right price for me or not’
                                       ‘the right price for me or not’

                    We know we need to work with prices, adjust them and take
                    We know we need to work with prices, adjust them and take
                 advantage of them so they are perceived as ‘the right price for me’
                 advantage of them so they are perceived as ‘the right price for me’




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   26
Introduction to Revenue Management
  How prices were set and how prices are currently set


                   Without Yield – Prices based upon cost

                                                                    Cost of                      Desired
                              Cost of Production
                                                                  Distribution                    Profit


                     $$              $$$                          $$$$$                            $$$$$




                   With Yield – Prices based upon demand

                                                                    Cost of                     Desired              YIELD
                              Cost of Production
                                                                  Distribution                   Profit                Pr


                     $$              $$$                          $$$$$                            $$$$$$          $$$$$$$$$$$$$$$$$$$$




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons            27
Introduction to Revenue Management
  Real impact on hotels



               A hotel has 200 rooms…

               If they apply RM for each of their rooms and each room
               achieves an increase of €2, the impact on final results is
               significant.


                                         200 rooms x 2$ = 400$/day x 365 days = 146.000$
                                         200 rooms x 3$ = 600$/day x 365 days = 219.000$
                                         200 rooms x 5$ = 1000$/day x 365 days = 365.000$




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   28
Introduction to Revenue Management
  Real impact on hotels




                          1 Hotel x 100 rooms x 365 days =
                          36,500 rooms x 1/3 = 12,166 rooms


                                                                                                   12,166 x 3 $ = 36,498 $
                                                                                                   12,166 x 6 $ = 72,996 $
                                                                                                   12,166 x 9 $ = 109,494 $

                                                                        TOTAL ANNUAL INCREASE = 218,988 $




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   29
Introduction to Revenue Management
  Real impact on hotels



                Pricing Mix




                                                                  Price
                                                                               Nº of Rooms




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013           Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   30
Introduction to Revenue Management




                                                How clients agree to prices…




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   31
Introduction to Revenue Management
Consumer Behavior




Hotel Revenue Management Seminar – Miami Beach, FL   7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   32
Introduction to Revenue Management
 Fixed Pricing (static)




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   33
Introduction to Revenue Management
 Booking Engine




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   34
Introduction to Revenue Management
 Dynamic Pricing – Actions




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   35
Introduction to Revenue Management
 Distribution – Direct or Indirect




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   36
Introduction to Revenue Management
 Maintaining Indirect Distribution




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   37
Introduction to Revenue Management
Billboard Effect




Hotel Revenue Management Seminar – Miami Beach, FL   7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   38
Introduction to Revenue Management




                                                 Implementation




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   39
Introduction to Revenue Management
  Definitions




          Revenue Manager:


          Revenue Management:


          Yield Management:




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   40
Introduction to Revenue Management
 Corporate Policy




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   41
Introduction to Revenue Management
 When is it appropriate to apply ‘Yield’


          To implement RM we need:

          •   Fixed production of stock/products
          •   Perishable product
          •   Clear policy on dynamic pricing
          •   Ability to update prices quickly
          •   Reservations/sales occur within a time period
          •   Ability to segment the market or groups of customers

          To manage RM actions, the involvment of Management, Sales and Reservations
          is required. Their must be a unified vision and mission, and agreed objectives.

          It’s necessary to collect information about demand: price paid, reservation dates,
          dates of consumption, quantity of demand, events in the destination or origen
          location, competitors’ prices, distributors…




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   42
Introduction to Revenue Management
 Main techniques


               The main RM tools:



               •   Availability management
               •   Categories
               •   Groups
               •   Reservation terms
               •   Auto-Allotment
               •   CTA, Close-to-Arrival
               •   MinLOS & MaxLOS
               •   Upselling
               •   Overbooking




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   43
Introduction to Revenue Management
 How we set prices


               The key point is to have the ‘right price’.

               To determine the right price we take in to account:



               •   Value of our product
               •   Customers’ perceived value
               •   Positioning
               •   Competition




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   44
Introduction to Revenue Management
 Management of Availability


               The correct management of availability is one of the most
               important points of good RM


               Factors that affect availability include:

               •   Reservation terms
               •   Rates
               •   Reservations not guaranteed
               •   Pre-payments
               •   Categories
               •   Groups
               •   Overbooking
               •   Waiting lists
               •   Peaks and valleys in planning




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   45
Introduction to Revenue Management
 Types of Rates


               All hotels offer a variety of rate types. The trend is to simplify
               them into ‘rate periods’ and apply to BAR ‘discount periods’.

               With the current system we lose competitivity and have to work
               more hours to organize our work.


               Rate types:

               •   Published rates on hotel website, Booking…
               •   Negotiated ECI, companies, groups…
               •   Packaged, Expedia…
               •   Opaque Atrapalo, Lastminute
               •   Restricted cancellations, advanced payment, promotions




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   46
Introduction to Revenue Management
  Price Matrix




                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




           Creation of numerous published rates that pass from one to the
           other in function of the level of occupation and expected demand,
           and we make if from the level of rates that we consider most
           opportune.

           ¿What is the BAR Best Available Rate?


Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 47
Introduction to Revenue Management
 Price Matrix x Occupation




                             Demand Profile                Nov - Mar                        Apr - Jun                        Jul - Oct

                                                                       BAR                              BAR                             BAR
                                                   Occupation Rate                  Occupation Rate                 Occupation Rate
                                                                     Rate Base                        Base Rate                       Base Rate

                                                                           215                              230                             250
                             High Demand              >75%                 205         >85%                 215         >95%                235
                                                                           180                              195                             215

                                                                           190                              215                             235
                          Moderate Demand              65%                 175          75%                 205         75%                 225
                                                                           165                              180                             200

                                                                           190                              190                             210
                             Low Demand                55%                 170          65%                 175         65%                 195
                                                                           150                              165                             185

                                                                           140                              150                             170
                          Very Low Demand             <50%                 110         >55%                 130         >55%                150
                                                                            75                              115                             135




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013        Presented by: Tomeu Pons   tomeupons@gmail.com     @tomeu_pons             48
Introduction to Revenue Management
 Total Demand, Unconstrained Demand


               The total demand of a room for a specified day. This figure is
               independent of the physical capacity of the hotel.

               For the total registered demand for a product, it’s useful to have
               a system that permits ‘on-request’, including when all rooms are
               already sold.

               This demand will allow us to calculate the “Last Room Value”, or
               how much somebody is willing to pay for the last room in our
               inventory.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   49
Introduction to Revenue Management
 Segmentation of the Market/Consumers


               Market segmentation is the study of consumers and what their
               different motives may be for choosing our hotel.

               This allows us to to create different segments or groups of
               consumers according to their motives for the visit.

               To know these motives we must be able to analyze ways to
               increase the demand in each of these segments.

               We also must know the segments of our competitors and the
               destination in general to make comparisons.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   50
Introduction to Revenue Management
 Segmentation of the Market/Consumers


               In order to investigate the segmentation of the market and
               consumers, we must collect data:

                        •     Duration of stay
                        •     Motive for the stay – source and recipient
                        •     Motive to choose hotel
                        •     How long in advance did they book hotel
                        •     Revenue per room
                        •     Revenue per client
                        •     Distribution channel where booking was made




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   51
Introduction to Revenue Management
 Price Elasticity


               Price elasticity measures the effect changes in price have on
               demand. Sometimes an increase in price causes a significant
               decrease in the demand and in other instances only a slight
               decrease.




                   Elastic Demand                                                      Inelastic Demand

                   • High competition                                                  • Low competition
                   • Standard services                                                 • Differentiated services




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   52
Introduction to Revenue Management
 Segmentation of the Market/Consumers




               Example:




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   53
Introduction to Revenue Management
 Demand Forecasting


               Investigation based on a calendar that allows us to know the
               demand that our product will have in the future.

               The objective is to forecast the periods of low demand and
               stimulate sales, as well as to know the periods of high demand in
               which we can increase rates.

               Use Google Calendar to collect all of the events that can
               influence consumption. This tool is easy to use and available to
               all of the team.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   54
Introduction to Revenue Management
 Demand Forecasting




               Forecasting consists of the estimation and analysis of future
               demand for a specific product or service using inputs such as
               historic sales, marketing estimates and promotional information.

                                                                                              Price Waterhouse Coopers




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   55
Introduction to Revenue Management
 Demand Forecasting


               To be able to forecast, it’s necessary to know historic consumption
               data, referring to:

                                •     Consumption weekdays
                                •     Consumption during events: conferences, festivals…
                                •     Consumption during vacations
                                •     Clients – Business or Leisure
                                •     Changes in demand

               It can be easy to make a forecast. If you can, also make a
               forecast about your competitors and about the destination.

               This document will allow you to know the number of arrivals and
               departures, occupation by room and possibly revenue from other
               non-room sources.
               It’s a great tool to define internal objectives.


Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   56
Introduction to Revenue Management
 Objective of Forecasting




                                         Why do we make forecasts?

                                         •   Measure demand
                                         •   Forsee falls in demand
                                         •   React to low demand
                                         •   Define commercial strategy
                                         •   Apply rates
                                         •   Restrict sales
                                         •   Control costs
                                         •   Control commissions
                                         •   Financial planning
                                         •   Human Resources planning




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   57
Introduction to Revenue Management
 Forecasting: Behavior Patterns of Reservations


               Booking Pace
               The booking pace must be monitized for the current day and
               future days to ensure alignment with the forecast and to be able
               to react to any deviations from the forecast that occur.


               DailyPick-up
               The daily pick-up, and the ability to follow the rhythym of
               reservations must distinguish individuals and groups.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   58
Introduction to Revenue Management
 Pick-Up


               The pick-up is the figure that tells us today how many confirmed
               reservations we have for a specific day.
               This figure shows us in a detailed way, by day or room type, the
               % already sold.

               This figure allows us to guide our decisions to increase or
               maintain rates for a specific day and what we must already apply
               today.

               The ideal is to be able to analyze and act daily, in all distribution
               channels, with this information.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   59
Introduction to Revenue Management
 Pick-Up


       Difference in the number of reservations between one date and another.
       Example: Reservations made yesterday for the month of June.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   60
Introduction to Revenue Management
 Forecasting Elements


               To record:

               •   Objectives reached vs. objectives set
               •   Reservations on the books
               •   Pick-up realized vs. expected pick-up
               •   Expected segments
               •   Average rate
               •   Total revenue


               We should forecast:

               •   Once       per     week for the next 4 weeks
               •   Once       per     month for the next 3 months
               •   Once       per     month every 3 months for the whole year
               •   Once       per     year for the next year



Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   61
Introduction to Revenue Management
 Demand Curve vs. Advanced Reservation




                                                                                        Individuals

                                                                   Companies

                                                     FIT

                          Groups


                        -60                               -30                   -15                       -5           Days before arrival




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons               62
Introduction to Revenue Management
 Demand Curve




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   63
Introduction to Revenue Management
 Groups


               We should take note of all Group requests in our statistics, so we
               can evaluate profitability and apply RM to group pricing.

                                •     Provider
                                •     Type of contract
                                •     Revenue per room
                                •     Revenue per guest
                                •     Revenue per group
                                •     Group sub-segments
                                •     Purpose of the visit
                                •     number of and motive for cancellations




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   64
Introduction to Revenue Management
 Demand Curve




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   65
Introduction to Revenue Management
 Tour Operators


               Tour operator contracts are the most difficult to apply RM to
               since the system of prices and sales is already fairly static.
               Technically, it is a segment ‘not yieldable’.

               Hotels should insist the tour operators agree to dynamic
               prices, but these companies and their ‘packages’ business
               model make it very difficult commercially to use dynamic
               pricing methods.

               From the analysis of these contracts we can reason that there
               are months hotels benefit from them and months where sales
               opportunities are lost due to them.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   66
Introduction to Revenue Management
 Shoulder Days


               What is the impact of closing sales for a specific day?
               The impact of closing sales of a room type for specified dates
               could be larger than what we believe.

               The “Shoulder days” are the days of ‘closed stays’ that imply
               a reservation. In other words, the 2 or 3 days the client would
               have stayed in the hotel.

               This statistic helps us to calculate the impact on revenue
               when a room type isn’t available.
               Some segments like groups and tour operators can produce a
               large number of ‘shoulder days’.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   67
Introduction to Revenue Management




                                           What actions should we take?




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   68
Introduction to Revenue Management
 Tactics – How to act during high demand


               High Demand

               • Close or restrict discounts
               • Apply a minimum of nights, but with caution
               • Reduce groups and ‘shoulder days’
               • Reduce ‘late check out’, and in moderation, if possible, ‘late check in’
               • Increase guarantees and cancellation charges
               • Increase rates in accordance with those the competition
               • Increase the cost of packages and hotel services
               • Apply the full cost of suits and executive rooms
               • Select dates that are ‘closed to arrivals’
               • Evaluate the total profit of the hotel and try to increase it
               • Invoice for all of the nights in case the client shortens their stay




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   69
Introduction to Revenue Management
 Tactics – How to act during low demand


               Low demand:

               • Sell added value and special benefits
               • Offer packages including internal and external products
               • Don’t close sales of the cheapest category of rooms
               • Incentivize upgrades
               • Offer better prices at adjusted budgets
               • Don’t use ‘stay restrictions’
               • Motivate hotel staff to be especially attentive
               • Monitor competitors’ actions
               • Lower prices




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   70
Introduction to Revenue Management
 Consistency




                          Consistency in applying prices…

                          It’s very important to be consistent with our product, services
                          and the value we offer.

                          We must align our value, price and quality, in order to not
                          disappoint our customers.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   71
Introduction to Revenue Management
 Tactics – Four Revenue Management


               Principal points to remember:

                        •
                        •
                        •
                        •
                        •
                        •
                        •
                        •
                        •
                        •
                        •
                        •



Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   72
Introduction to Revenue Management
 Questions




               When should we reject a sale?

               Is it useful to know how much customers spend?

               When should we offer a discount?

               When should we use overbooking?




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   73
Introduction to Revenue Management
  How do we measure our Factor Yield / RM




                                    Room Revenue
                                           o
                               Average Rate x Occupation
                                                                                                         Revenue per Available Room
                                                                                                                  RevPAR
                               Number of Rooms Available




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons        74
Introduction to Revenue Management
  How do we measure our Factor Yield / RM




                                 Total Revenue
                                                                                                TRevPAr Total Revenue per Available Room
                               Rooms Available




                       Gross Operating Profit – GOP
                                                                                                GOPPar
                                                                                                Gross Operational Profit per Available Room
                               Rooms Available




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                75
Introduction to Revenue Management
 Elements of Analysis

               We have three levels of analysis: daily, monthly and yearly

               Daily:
               • Average occupation
               • Average rate
               • Rev PAR
               • Pick-Up

               Monthly:
               • Geographic origin, GOB
               • Length-of-stay, LOS
               • Lead Time
               • Channel
               • Commissions

               Always:
               • Profitability of each type of guest


Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   76
Introduction to Revenue Management
 Benchmarking


               Benchmarketing is the study of the competition to discover how
               they sell, at what price and what their occupancy is. The objective
               is to discover how we can improve and act upon this with
               distributors, guests…To be able to improve our commercialization.

               At a minimum, benchmarking should give us information on:

                                                •     Prices
                                                •     Room type
                                                •     Products
                                                •     Packages
                                                •     Channels of distribution
                                                •     Occupation
                                                •     Services offered




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   77
Introduction to Revenue Management
 Benchmarking

                 My Hotel vs. My Competitors
                 Who manages their hotel better, Manager A or Manager B?




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   78
Introduction to Revenue Management
 Daily Prices


               To manage our prices taking into account the prices our
               competition is selling at, is one of the best tools to help us sell
               smarter. From them we can make a number of conclusions.
               There are a number of ways to obtain this information.

               The questions we seek to answer include:

                                        •     What is their strategy?
                                        •     Do they use ‘yield’?
                                        •     What occupation do they have?
                                        •     Can it affect our sales?
                                        •     What would be their future prices?
                                        •     Do they require minimum stay (L.O.S.)?




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   79
Introduction to Revenue Management
 Place your hotel: market vs. your value


               All of the commercial policies and prices of your establishment
               must be consistent with your product and values.

               Aligning price, services and product will ensure you have an
               excellent perceived value for money and that demand is more
               loyal and sustained.

               Monitor your competitors in terms of their products and
               associated ‘perceived value’. After, compare your hotel to theirs
               and adjust your offering to be more competitive and more
               productive.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   80
Introduction to Revenue Management
 Place your hotel: market vs. your value


               Evaluate your hotel and your competitors:

                                •     Product – room type
                                •     Product – hotel services
                                •     Price
                                •     Channels of distribution
                                •     Location
                                •     Strengths and weaknesses
                                •     Client segments of the hotel
                                •     Their presence in other markets
                                •     What hotels have similar prices

               You can also study the market for your destination, as well as
               source markets.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   81
Introduction to Revenue Management
 Place your hotel: market vs. your value - SWOT



                                                            Strengths                        Weaknesses


      My Hotel




      My Environment


                                                             Threats                         Opportunities




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   82
Introduction to Revenue Management
 Market Share Report

               This study helps us to understand our results compared to our
               competitors, especially in regards to the average price and
               occupation.

               The parameters are:

               MPI. Market Penetration Index
               market penetration rate vs. the average occupation of our
               competitors

               ARI. Average Rate Index
               average price index, our average price vs. our competitors

               RGI. Revenue Generator Index
               revenue generator index, our share of revenue vs. our
               competitors



Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   83
Introduction to Revenue Management
 Distributors


               Our presence with distributors is key. We can consult them at
               any time for competitive data and we can observe the positions
               they occupy in search engine results.

               We can observe how they sell… use of photography, text,
               reference to locations, positioning of product.

               Very good presence with distributors can help our product
               compete with superior hotels (in this case we’d be competitive
               on price) and with similar hotels (in this case we’d be the
               better option).




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   84
Introduction to Revenue Management
 How to be present. Distributors and the exponential effect.




                                   Is it really the same hotel? Where will customers book it?
                                   The hotel’s website is not the best option to book it in this case.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   85
Introduction to Revenue Management
 Many published rates and many products


               An establishment should have however many rates they believe
               to be opportune. All rates should be competitive depending upon
               the moment they are applied.

               Attention to the offers and closed prices and/or flat-rates offered
               to companies and agencies.

               If the latter act with a discount code, we must always reference
               these exceptions and offers.

               All products should always be offered and done so with the
               largest number of distributors possible.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   86
Introduction to Revenue Management
  Pricing Matrix




                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 87
Introduction to Revenue Management
 Optimize your supplementary products


               Clients for the most part consume on impulse. A direct call to
               make a reservation sometimes lasts only a few minutes, as can
               the online process, so we must always present ourselves in the
               most ‘desirable’ fashion.

               Different room types meet different needs of different segments.
               Why don’t we offer them all?

               In the descriptions suggested ‘use/benefits’ are given. Create
               clear differences between the room categories. Stimulate the
               thought… ‘a little more per night you can enjoy…’




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   88
Introduction to Revenue Management
 Upselling


               Upselling is another tool that helps us to achieve good results
               from RM.

               Two moments when it can be applied:
                        • Moment reservation is made
                        • Arrival at hotel


               Offer what the client ‘needs’ in a direct way for a little more
               money.
               We must:
                           • Understand the client
                           • Observe their needs
                           • Propose options
                           • Communicate the benefits




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   89
Introduction to Revenue Management
 Price Parity


               Although price parity is a model criticized by some, others
               defend it.

               In spite of not being logically sound financially, it’s use has
               spread and has been accepted by all OTA’s.

               Internally, the differences between the reprecussion of the
               commissions that are considered as costs of promotion or
               sales; are compensated some OTA’s with others.

               In the case of not having parity, clients will buy in mass, the
               cheapest OTA’s. Although this would be more effective,
               having one OTA’s dominating almost all sales would be
               dangerous.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   90
Introduction to Revenue Management
 Commercial Parity


               Commercial parity is based on the commercial parameters that
               can influence the client’s purchase

               It’s important to have commercial parity with our distributors
               because they otherwise could have advantages over our own
               channel.

                                                • Payment conditions
                                                • Reservation conditions
                                                • Cancellation charges
                                                • Advance notice of cancellation required
                                                • Cleaning charges
                                                • Hidden offers
                                                • …




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   91
Introduction to Revenue Management
 Control Price Parity


               Controlling price parity is very important and affects our
               relationship with our clients and distributors.

               Technological tools exist to compare prices for our own hotel:

               •   know who we work with
               •   know who are our distributors
               •   know the mark-up on our product
               •   understand the distributor’s model: retail, merchant, opaque...




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   92
Introduction to Revenue Management
 Parity Disruptors


               Some companies willingly perform actions to cause “Parity
               Disruption”.

               Break the parity of your hotel to get benefits from it, decreasing
               your margin so clients choose your property.

               In other instances, data is aggregated from different channels to
               show which has the lower prices.
               Normally, these companies don’t have direct contracts with the
               hotel and use price comparison to attract clients.

               If it’s necessary, make reservations in each channel to get the
               voucher and know which agency is selling your property in this
               way.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   93
Introduction to Revenue Management
 Overbooking


               Overbooking isn’t an effect or a consequence.
               In RM, it is a tool that allows us to get the most ‘play’ out of our
               hotel’s availability.

               On many occasions, the no-shows, last minute cancellations and
               shortened stays, affect our profitability.
               It’s recommended to have an action plan for these occasions.

               We need to think about how these deviations will impact:
               costs of stay, costs of transportation, compensation for services
               or monetary, and possibly sanctions.




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   94
Introduction to Revenue Management
 Overbooking




          Calculate your level of Overbooking and evaluate risk vs. Profit



                                                                     Not Guaranteed
          Reservations Received                              >        Cancellations                           > Arrivals
                                                                       No Shows


                                                                   Rates we charge
                                                                  Transfer Expenses




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   95
Introduction to Revenue Management
  Parameters to measure efficacy




               REVPAR: Room Revenue per Available Room

               TREVPAR: Total Revenue per Available Room

               TREVPEC: Total Revenue per Client

               GOPPAR: Gross Operating Profit per Available Rooms

                       Conference/
               REVPAM: Conference/Banqueting Revenue per Available M2

               REVPASH: F&B Revenue per Available seats and hour




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   96
Introduction to Revenue Management
  When we obtain more by applying RM




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   97
Introduction to Revenue Management
  Where to obtain more by applying RM




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   98
Introduction to Revenue Management
  How much you’ve obtained by applying RM




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   99
Introduction to Revenue Management




                           Practice: How to determine our prices




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013   Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons   100
Introduction to Revenue Management
  Pricing Matrix


               Pricing Matrix – General


                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 101
Introduction to Revenue Management
  Pricing Matrix


               Pricing Matrix – Very Low Season
                                          100%        75%          50%          25%                                         99%          66%    33%




                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 102
Introduction to Revenue Management
  Pricing Matrix


               Pricing Matrix – Low Season
                                                                                          100%        75%        50%      25%




                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 103
Introduction to Revenue Management
  Pricing Matrix


               Pricing Matrix – Mid-Season
                                                                               99%         66%         33%




                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 104
Introduction to Revenue Management
  Pricing Matrix


               Pricing Matrix – Mid-to-High Season
                                                     100%         75%          50%         25%




                                        RACK
                                         RACK       PREF
                                                     PREF         BAR1
                                                                   BAR1      BAR2
                                                                              BAR2        BAR3
                                                                                           BAR3       BAR4
                                                                                                       BAR4      BAR5
                                                                                                                  BAR5    BAR6
                                                                                                                           BAR6     WKD1
                                                                                                                                    WKD1       WKD2
                                                                                                                                               WKD2


                 Standard
                 Standard                200
                                          200        160
                                                      160         140
                                                                   140        120
                                                                               120        110
                                                                                           110        100
                                                                                                       100        90
                                                                                                                   90      80
                                                                                                                            80          70
                                                                                                                                         70    60
                                                                                                                                                60

                 Superior
                 Superior                215
                                          215        175
                                                      175         155
                                                                   155        135
                                                                               135        125
                                                                                           125        115
                                                                                                       115       105
                                                                                                                  105      95
                                                                                                                            95          85
                                                                                                                                         85    75
                                                                                                                                                75

                   Suite
                   Suite                 230
                                          230        190
                                                      190         170
                                                                   170        150
                                                                               150        140
                                                                                           140        130
                                                                                                       130       120
                                                                                                                  120      110
                                                                                                                            110         100
                                                                                                                                         100   90
                                                                                                                                                90




Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013          Presented by: Tomeu Pons   tomeupons@gmail.com   @tomeu_pons                 105
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course
Tutorial introduction to revenue management for hotels hospitality seminar  what is revenue management in hotel industry course

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Tutorial introduction to revenue management for hotels hospitality seminar what is revenue management in hotel industry course

  • 1. Introduction to Hotel Revenue Management Earn More by Selling the Same Presented by Tomeu Pons 7 May 2013 | Miami Beach, FL
  • 2. Introduction to Revenue Management Presentation The main objective of this seminar is to understand the purpose of revenue management in both technological and commercial terms. With this information, a hotel can evaluate, develop and optimize its pricing strategy with the goal of maximizing profits. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 2
  • 3. Introduction to Revenue Management Presentation Professor: Tomeu Pons tomeupons@gmail.com Collaborating Professor – Turisme Sant Ignasi TSI, Fundación ESADE Fundació Tourism Education Manager – Cibernarium, Barcelona Activa Collaborating Professor – University of Barcelona E- Educated in Hospitality, Marketing, E-commerce and IT Systems in Hotelerí Escola Hotelería UIB, ESADE, La Salle URL and UPC Chief Operating Office – Flamingo Hotelier Previously, Consultant ,Director of Marketing and CEO in companies companies such as The Perfect Hotels, Sercotel, Hotusa and SAP Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 3
  • 4. Introduction to Revenue Management Agenda • Definition • Price • Effects on a hotel • Distribution: direct and indirect • When it is used • Factors • Tactics • Calculating prices • Reporting, statistics and tools • Exercises • Glossary • Exam • Notes Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 4
  • 5. Introduction to Revenue Management Definition Revenue Management is a commercial management technique that helps us to sell the right product at the right moment at the right price to the right client. Wikipedia: http://en.wikipedia.org/wiki/Revenue_management Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 5
  • 6. Introduction to Revenue Management Why use RM? Revenue Management is a strategy we can use in response to: • Increased competition • Increase in channels of distribution • Transparency in prices • Increase in special promotions and discounts • Decrease in expected response time to clients • 80% of sales are influenced by online channels Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 6
  • 7. Introduction to Revenue Management Definition Revenue Management is a method of managing sales of hotel inventory by applying yield management techniques Revenue Management: Commercial management technique that helps us sell the right product at the right moment at the right price to the right client Yield: The techniques, formulas and strategies hotels use to manage inventory, price and sales policies to maximize revenue generated from the sale of this inventory Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 7
  • 8. Introduction to Revenue Management Basic Elements of Revenue Management Basic elements of Revenue Management used to manage inventory: • Historical data – statistics, demand and trends • Forecasts • Price management tools • Overall strategy • Pricing policies With the above, we can address: • Fixed and perishable inventory • Anticipated sales • Customer segmentation Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 8
  • 9. Introduction to Revenue Management Improve RevPAR and GopPAR RevPAR RevPAR GopPAR GopPAR Increase Increase Increase Increase your your occupancy occupancy Rooms Rooms ADR ADR Maximize Maximize Revenue Revenue and profit and profit Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 9
  • 10. Introduction to Revenue Management Desired equilibrium in response to a changing market Sell at Sell at high prices low prices Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 10
  • 11. Introduction to Revenue Management The Customer The customer is the most important factor in determining price. Each client is different and has their own motivation: • Different motives • Different expectations • Willing to pay different prices • Interested in different products To understand this environment we must ‘segment’ the market, and for each of these segments we must adapt: • Interested in different products • Pricing • Reservation terms • Marketing along the path-to-purchase Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 11
  • 12. Introduction to Revenue Management The Product The product is another of the key factors. What is it about our product that drives sales? • Hotel • Destination • Experience • Rooms • Services Once we determine this, we can effectively develop our product: Create additional room types? Create a range of price points? Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 12
  • 13. Introduction to Revenue Management The Price Although the price seems to be a lever we control, this is completely false: - Price is determined by demand - Prices rise and prices fall - High seasons and low seasons - Years with low/no demand - Channels with low/no demand - Competition, local and international affects demand However, there are techniques and factors that enable us to increase prices. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 13
  • 14. Introduction to Revenue Management The Moment of the Reservation The moment of reservation is a key element in the management of prices and quite often it isn’t take seriously enough It’s an important moment for the customer just as much as it is an important moment for the hotel. Both must work together in the same way. Many techniques exist for both players. Forecasts based on historical data help us a great deal. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 14
  • 15. Introduction to Revenue Management How it was born … Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 15
  • 16. Introduction to Revenue Management Where it was born, how and what need it met… Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 16
  • 17. Introduction to Revenue Management Where it was born, how and what need to it meet These sales techniques were developed during the middle of the 20th century by American companies. Once their information systems were computerized, they were able to apply these methods effectively. Companies could sell airplane tickets at different prices. They realized that different clients, at different times, with different motivations, were willing to pay different prices. To be able to ‘predict’ how much clients were willing to pay for a ticket, they developed ‘Yield’ techniques that allowed them to fixed these prices. It was important for them to computerize and collect information about supply and demand. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 17
  • 18. Introduction to Revenue Management An example Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 18
  • 19. Introduction to Revenue Management Variability of industry pricing Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 19
  • 20. Introduction to Revenue Management Evolution of Tourism Pricing Management History of Pricing The total acceptance and integration of the Internet as a major sales channel changed the way hotels price their inventory: 2003 – Some Majors changed to dynamic pricing 2004 – Fixed Consortia pricing disappeared 2005 – Decrease number of Categories and continued change to dynamic pricing 2006 – Some corporate accounts are already dynamic 2007 – BAR is implemented completely Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 20
  • 21. Introduction to Revenue Management Definition Pricing Techniques to determine prices are developed in the heart of each company. Setting prices can vary depending on the strategy of the company. The main factors in setting prices are: • Production costs • Market • Competition • Demand • Product positioning Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 21
  • 22. Introduction to Revenue Management Pricing Where do prices come from? What are customers willing to pay? $ $ $ $ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 22
  • 23. Introduction to Revenue Management Pricing Techniques to set the prices of a good or a service… Setting of prices can focus on anything from cost of production to consumer demand. From the point-of-view of marketing, an ‘efficient price’ is a price that is close to the maximum price a consumer is willing to pay. In economic terms, it is a price that transfers the most value obtained by the consumer to the producer. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 23
  • 24. Introduction to Revenue Management Pricing – Where do prices come from? In the mind of the consumer, they are comparing different options (substitute products), taking into consideration their budget and the benefits of the purchase (e.g. pleasure). This determines, in their minds, the right price they’d pay. For a company to increase profitability from sales, they must know in each moment what is the approximate maximum price a customer is willing to pay for the product or service. To increase the consumers’ perceived value of our products and services, we must take in to account factors such as product, price, distribution and promotions. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 24
  • 25. Introduction to Revenue Management Pricing – An Efficient Price The efficient price is the maximum consumers are willing to pay. Prices are influenced by multiple factors… But they are only perceived as ‘the right price for me or not’ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 25
  • 26. Introduction to Revenue Management Now that we understand that prices are factors affected by Now that we understand that prices are factors affected by multiple variables and are only perceived as multiple variables and are only perceived as ‘the right price for me or not’ ‘the right price for me or not’ We know we need to work with prices, adjust them and take We know we need to work with prices, adjust them and take advantage of them so they are perceived as ‘the right price for me’ advantage of them so they are perceived as ‘the right price for me’ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 26
  • 27. Introduction to Revenue Management How prices were set and how prices are currently set Without Yield – Prices based upon cost Cost of Desired Cost of Production Distribution Profit $$ $$$ $$$$$ $$$$$ With Yield – Prices based upon demand Cost of Desired YIELD Cost of Production Distribution Profit Pr $$ $$$ $$$$$ $$$$$$ $$$$$$$$$$$$$$$$$$$$ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 27
  • 28. Introduction to Revenue Management Real impact on hotels A hotel has 200 rooms… If they apply RM for each of their rooms and each room achieves an increase of €2, the impact on final results is significant. 200 rooms x 2$ = 400$/day x 365 days = 146.000$ 200 rooms x 3$ = 600$/day x 365 days = 219.000$ 200 rooms x 5$ = 1000$/day x 365 days = 365.000$ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 28
  • 29. Introduction to Revenue Management Real impact on hotels 1 Hotel x 100 rooms x 365 days = 36,500 rooms x 1/3 = 12,166 rooms 12,166 x 3 $ = 36,498 $ 12,166 x 6 $ = 72,996 $ 12,166 x 9 $ = 109,494 $ TOTAL ANNUAL INCREASE = 218,988 $ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 29
  • 30. Introduction to Revenue Management Real impact on hotels Pricing Mix Price Nº of Rooms Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 30
  • 31. Introduction to Revenue Management How clients agree to prices… Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 31
  • 32. Introduction to Revenue Management Consumer Behavior Hotel Revenue Management Seminar – Miami Beach, FL 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com 32
  • 33. Introduction to Revenue Management Fixed Pricing (static) Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 33
  • 34. Introduction to Revenue Management Booking Engine Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 34
  • 35. Introduction to Revenue Management Dynamic Pricing – Actions Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 35
  • 36. Introduction to Revenue Management Distribution – Direct or Indirect Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 36
  • 37. Introduction to Revenue Management Maintaining Indirect Distribution Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 37
  • 38. Introduction to Revenue Management Billboard Effect Hotel Revenue Management Seminar – Miami Beach, FL 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com 38
  • 39. Introduction to Revenue Management Implementation Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 39
  • 40. Introduction to Revenue Management Definitions Revenue Manager: Revenue Management: Yield Management: Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 40
  • 41. Introduction to Revenue Management Corporate Policy Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 41
  • 42. Introduction to Revenue Management When is it appropriate to apply ‘Yield’ To implement RM we need: • Fixed production of stock/products • Perishable product • Clear policy on dynamic pricing • Ability to update prices quickly • Reservations/sales occur within a time period • Ability to segment the market or groups of customers To manage RM actions, the involvment of Management, Sales and Reservations is required. Their must be a unified vision and mission, and agreed objectives. It’s necessary to collect information about demand: price paid, reservation dates, dates of consumption, quantity of demand, events in the destination or origen location, competitors’ prices, distributors… Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 42
  • 43. Introduction to Revenue Management Main techniques The main RM tools: • Availability management • Categories • Groups • Reservation terms • Auto-Allotment • CTA, Close-to-Arrival • MinLOS & MaxLOS • Upselling • Overbooking Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 43
  • 44. Introduction to Revenue Management How we set prices The key point is to have the ‘right price’. To determine the right price we take in to account: • Value of our product • Customers’ perceived value • Positioning • Competition Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 44
  • 45. Introduction to Revenue Management Management of Availability The correct management of availability is one of the most important points of good RM Factors that affect availability include: • Reservation terms • Rates • Reservations not guaranteed • Pre-payments • Categories • Groups • Overbooking • Waiting lists • Peaks and valleys in planning Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 45
  • 46. Introduction to Revenue Management Types of Rates All hotels offer a variety of rate types. The trend is to simplify them into ‘rate periods’ and apply to BAR ‘discount periods’. With the current system we lose competitivity and have to work more hours to organize our work. Rate types: • Published rates on hotel website, Booking… • Negotiated ECI, companies, groups… • Packaged, Expedia… • Opaque Atrapalo, Lastminute • Restricted cancellations, advanced payment, promotions Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 46
  • 47. Introduction to Revenue Management Price Matrix RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Creation of numerous published rates that pass from one to the other in function of the level of occupation and expected demand, and we make if from the level of rates that we consider most opportune. ¿What is the BAR Best Available Rate? Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 47
  • 48. Introduction to Revenue Management Price Matrix x Occupation Demand Profile Nov - Mar Apr - Jun Jul - Oct BAR BAR BAR Occupation Rate Occupation Rate Occupation Rate Rate Base Base Rate Base Rate 215 230 250 High Demand >75% 205 >85% 215 >95% 235 180 195 215 190 215 235 Moderate Demand 65% 175 75% 205 75% 225 165 180 200 190 190 210 Low Demand 55% 170 65% 175 65% 195 150 165 185 140 150 170 Very Low Demand <50% 110 >55% 130 >55% 150 75 115 135 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 48
  • 49. Introduction to Revenue Management Total Demand, Unconstrained Demand The total demand of a room for a specified day. This figure is independent of the physical capacity of the hotel. For the total registered demand for a product, it’s useful to have a system that permits ‘on-request’, including when all rooms are already sold. This demand will allow us to calculate the “Last Room Value”, or how much somebody is willing to pay for the last room in our inventory. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 49
  • 50. Introduction to Revenue Management Segmentation of the Market/Consumers Market segmentation is the study of consumers and what their different motives may be for choosing our hotel. This allows us to to create different segments or groups of consumers according to their motives for the visit. To know these motives we must be able to analyze ways to increase the demand in each of these segments. We also must know the segments of our competitors and the destination in general to make comparisons. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 50
  • 51. Introduction to Revenue Management Segmentation of the Market/Consumers In order to investigate the segmentation of the market and consumers, we must collect data: • Duration of stay • Motive for the stay – source and recipient • Motive to choose hotel • How long in advance did they book hotel • Revenue per room • Revenue per client • Distribution channel where booking was made Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 51
  • 52. Introduction to Revenue Management Price Elasticity Price elasticity measures the effect changes in price have on demand. Sometimes an increase in price causes a significant decrease in the demand and in other instances only a slight decrease. Elastic Demand Inelastic Demand • High competition • Low competition • Standard services • Differentiated services Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 52
  • 53. Introduction to Revenue Management Segmentation of the Market/Consumers Example: Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 53
  • 54. Introduction to Revenue Management Demand Forecasting Investigation based on a calendar that allows us to know the demand that our product will have in the future. The objective is to forecast the periods of low demand and stimulate sales, as well as to know the periods of high demand in which we can increase rates. Use Google Calendar to collect all of the events that can influence consumption. This tool is easy to use and available to all of the team. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 54
  • 55. Introduction to Revenue Management Demand Forecasting Forecasting consists of the estimation and analysis of future demand for a specific product or service using inputs such as historic sales, marketing estimates and promotional information. Price Waterhouse Coopers Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 55
  • 56. Introduction to Revenue Management Demand Forecasting To be able to forecast, it’s necessary to know historic consumption data, referring to: • Consumption weekdays • Consumption during events: conferences, festivals… • Consumption during vacations • Clients – Business or Leisure • Changes in demand It can be easy to make a forecast. If you can, also make a forecast about your competitors and about the destination. This document will allow you to know the number of arrivals and departures, occupation by room and possibly revenue from other non-room sources. It’s a great tool to define internal objectives. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 56
  • 57. Introduction to Revenue Management Objective of Forecasting Why do we make forecasts? • Measure demand • Forsee falls in demand • React to low demand • Define commercial strategy • Apply rates • Restrict sales • Control costs • Control commissions • Financial planning • Human Resources planning Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 57
  • 58. Introduction to Revenue Management Forecasting: Behavior Patterns of Reservations Booking Pace The booking pace must be monitized for the current day and future days to ensure alignment with the forecast and to be able to react to any deviations from the forecast that occur. DailyPick-up The daily pick-up, and the ability to follow the rhythym of reservations must distinguish individuals and groups. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 58
  • 59. Introduction to Revenue Management Pick-Up The pick-up is the figure that tells us today how many confirmed reservations we have for a specific day. This figure shows us in a detailed way, by day or room type, the % already sold. This figure allows us to guide our decisions to increase or maintain rates for a specific day and what we must already apply today. The ideal is to be able to analyze and act daily, in all distribution channels, with this information. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 59
  • 60. Introduction to Revenue Management Pick-Up Difference in the number of reservations between one date and another. Example: Reservations made yesterday for the month of June. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 60
  • 61. Introduction to Revenue Management Forecasting Elements To record: • Objectives reached vs. objectives set • Reservations on the books • Pick-up realized vs. expected pick-up • Expected segments • Average rate • Total revenue We should forecast: • Once per week for the next 4 weeks • Once per month for the next 3 months • Once per month every 3 months for the whole year • Once per year for the next year Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 61
  • 62. Introduction to Revenue Management Demand Curve vs. Advanced Reservation Individuals Companies FIT Groups -60 -30 -15 -5 Days before arrival Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 62
  • 63. Introduction to Revenue Management Demand Curve Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 63
  • 64. Introduction to Revenue Management Groups We should take note of all Group requests in our statistics, so we can evaluate profitability and apply RM to group pricing. • Provider • Type of contract • Revenue per room • Revenue per guest • Revenue per group • Group sub-segments • Purpose of the visit • number of and motive for cancellations Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 64
  • 65. Introduction to Revenue Management Demand Curve Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 65
  • 66. Introduction to Revenue Management Tour Operators Tour operator contracts are the most difficult to apply RM to since the system of prices and sales is already fairly static. Technically, it is a segment ‘not yieldable’. Hotels should insist the tour operators agree to dynamic prices, but these companies and their ‘packages’ business model make it very difficult commercially to use dynamic pricing methods. From the analysis of these contracts we can reason that there are months hotels benefit from them and months where sales opportunities are lost due to them. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 66
  • 67. Introduction to Revenue Management Shoulder Days What is the impact of closing sales for a specific day? The impact of closing sales of a room type for specified dates could be larger than what we believe. The “Shoulder days” are the days of ‘closed stays’ that imply a reservation. In other words, the 2 or 3 days the client would have stayed in the hotel. This statistic helps us to calculate the impact on revenue when a room type isn’t available. Some segments like groups and tour operators can produce a large number of ‘shoulder days’. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 67
  • 68. Introduction to Revenue Management What actions should we take? Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 68
  • 69. Introduction to Revenue Management Tactics – How to act during high demand High Demand • Close or restrict discounts • Apply a minimum of nights, but with caution • Reduce groups and ‘shoulder days’ • Reduce ‘late check out’, and in moderation, if possible, ‘late check in’ • Increase guarantees and cancellation charges • Increase rates in accordance with those the competition • Increase the cost of packages and hotel services • Apply the full cost of suits and executive rooms • Select dates that are ‘closed to arrivals’ • Evaluate the total profit of the hotel and try to increase it • Invoice for all of the nights in case the client shortens their stay Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 69
  • 70. Introduction to Revenue Management Tactics – How to act during low demand Low demand: • Sell added value and special benefits • Offer packages including internal and external products • Don’t close sales of the cheapest category of rooms • Incentivize upgrades • Offer better prices at adjusted budgets • Don’t use ‘stay restrictions’ • Motivate hotel staff to be especially attentive • Monitor competitors’ actions • Lower prices Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 70
  • 71. Introduction to Revenue Management Consistency Consistency in applying prices… It’s very important to be consistent with our product, services and the value we offer. We must align our value, price and quality, in order to not disappoint our customers. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 71
  • 72. Introduction to Revenue Management Tactics – Four Revenue Management Principal points to remember: • • • • • • • • • • • • Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 72
  • 73. Introduction to Revenue Management Questions When should we reject a sale? Is it useful to know how much customers spend? When should we offer a discount? When should we use overbooking? Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 73
  • 74. Introduction to Revenue Management How do we measure our Factor Yield / RM Room Revenue o Average Rate x Occupation Revenue per Available Room RevPAR Number of Rooms Available Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 74
  • 75. Introduction to Revenue Management How do we measure our Factor Yield / RM Total Revenue TRevPAr Total Revenue per Available Room Rooms Available Gross Operating Profit – GOP GOPPar Gross Operational Profit per Available Room Rooms Available Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 75
  • 76. Introduction to Revenue Management Elements of Analysis We have three levels of analysis: daily, monthly and yearly Daily: • Average occupation • Average rate • Rev PAR • Pick-Up Monthly: • Geographic origin, GOB • Length-of-stay, LOS • Lead Time • Channel • Commissions Always: • Profitability of each type of guest Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 76
  • 77. Introduction to Revenue Management Benchmarking Benchmarketing is the study of the competition to discover how they sell, at what price and what their occupancy is. The objective is to discover how we can improve and act upon this with distributors, guests…To be able to improve our commercialization. At a minimum, benchmarking should give us information on: • Prices • Room type • Products • Packages • Channels of distribution • Occupation • Services offered Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 77
  • 78. Introduction to Revenue Management Benchmarking My Hotel vs. My Competitors Who manages their hotel better, Manager A or Manager B? Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 78
  • 79. Introduction to Revenue Management Daily Prices To manage our prices taking into account the prices our competition is selling at, is one of the best tools to help us sell smarter. From them we can make a number of conclusions. There are a number of ways to obtain this information. The questions we seek to answer include: • What is their strategy? • Do they use ‘yield’? • What occupation do they have? • Can it affect our sales? • What would be their future prices? • Do they require minimum stay (L.O.S.)? Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 79
  • 80. Introduction to Revenue Management Place your hotel: market vs. your value All of the commercial policies and prices of your establishment must be consistent with your product and values. Aligning price, services and product will ensure you have an excellent perceived value for money and that demand is more loyal and sustained. Monitor your competitors in terms of their products and associated ‘perceived value’. After, compare your hotel to theirs and adjust your offering to be more competitive and more productive. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 80
  • 81. Introduction to Revenue Management Place your hotel: market vs. your value Evaluate your hotel and your competitors: • Product – room type • Product – hotel services • Price • Channels of distribution • Location • Strengths and weaknesses • Client segments of the hotel • Their presence in other markets • What hotels have similar prices You can also study the market for your destination, as well as source markets. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 81
  • 82. Introduction to Revenue Management Place your hotel: market vs. your value - SWOT Strengths Weaknesses My Hotel My Environment Threats Opportunities Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 82
  • 83. Introduction to Revenue Management Market Share Report This study helps us to understand our results compared to our competitors, especially in regards to the average price and occupation. The parameters are: MPI. Market Penetration Index market penetration rate vs. the average occupation of our competitors ARI. Average Rate Index average price index, our average price vs. our competitors RGI. Revenue Generator Index revenue generator index, our share of revenue vs. our competitors Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 83
  • 84. Introduction to Revenue Management Distributors Our presence with distributors is key. We can consult them at any time for competitive data and we can observe the positions they occupy in search engine results. We can observe how they sell… use of photography, text, reference to locations, positioning of product. Very good presence with distributors can help our product compete with superior hotels (in this case we’d be competitive on price) and with similar hotels (in this case we’d be the better option). Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 84
  • 85. Introduction to Revenue Management How to be present. Distributors and the exponential effect. Is it really the same hotel? Where will customers book it? The hotel’s website is not the best option to book it in this case. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 85
  • 86. Introduction to Revenue Management Many published rates and many products An establishment should have however many rates they believe to be opportune. All rates should be competitive depending upon the moment they are applied. Attention to the offers and closed prices and/or flat-rates offered to companies and agencies. If the latter act with a discount code, we must always reference these exceptions and offers. All products should always be offered and done so with the largest number of distributors possible. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 86
  • 87. Introduction to Revenue Management Pricing Matrix RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 87
  • 88. Introduction to Revenue Management Optimize your supplementary products Clients for the most part consume on impulse. A direct call to make a reservation sometimes lasts only a few minutes, as can the online process, so we must always present ourselves in the most ‘desirable’ fashion. Different room types meet different needs of different segments. Why don’t we offer them all? In the descriptions suggested ‘use/benefits’ are given. Create clear differences between the room categories. Stimulate the thought… ‘a little more per night you can enjoy…’ Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 88
  • 89. Introduction to Revenue Management Upselling Upselling is another tool that helps us to achieve good results from RM. Two moments when it can be applied: • Moment reservation is made • Arrival at hotel Offer what the client ‘needs’ in a direct way for a little more money. We must: • Understand the client • Observe their needs • Propose options • Communicate the benefits Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 89
  • 90. Introduction to Revenue Management Price Parity Although price parity is a model criticized by some, others defend it. In spite of not being logically sound financially, it’s use has spread and has been accepted by all OTA’s. Internally, the differences between the reprecussion of the commissions that are considered as costs of promotion or sales; are compensated some OTA’s with others. In the case of not having parity, clients will buy in mass, the cheapest OTA’s. Although this would be more effective, having one OTA’s dominating almost all sales would be dangerous. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 90
  • 91. Introduction to Revenue Management Commercial Parity Commercial parity is based on the commercial parameters that can influence the client’s purchase It’s important to have commercial parity with our distributors because they otherwise could have advantages over our own channel. • Payment conditions • Reservation conditions • Cancellation charges • Advance notice of cancellation required • Cleaning charges • Hidden offers • … Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 91
  • 92. Introduction to Revenue Management Control Price Parity Controlling price parity is very important and affects our relationship with our clients and distributors. Technological tools exist to compare prices for our own hotel: • know who we work with • know who are our distributors • know the mark-up on our product • understand the distributor’s model: retail, merchant, opaque... Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 92
  • 93. Introduction to Revenue Management Parity Disruptors Some companies willingly perform actions to cause “Parity Disruption”. Break the parity of your hotel to get benefits from it, decreasing your margin so clients choose your property. In other instances, data is aggregated from different channels to show which has the lower prices. Normally, these companies don’t have direct contracts with the hotel and use price comparison to attract clients. If it’s necessary, make reservations in each channel to get the voucher and know which agency is selling your property in this way. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 93
  • 94. Introduction to Revenue Management Overbooking Overbooking isn’t an effect or a consequence. In RM, it is a tool that allows us to get the most ‘play’ out of our hotel’s availability. On many occasions, the no-shows, last minute cancellations and shortened stays, affect our profitability. It’s recommended to have an action plan for these occasions. We need to think about how these deviations will impact: costs of stay, costs of transportation, compensation for services or monetary, and possibly sanctions. Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 94
  • 95. Introduction to Revenue Management Overbooking Calculate your level of Overbooking and evaluate risk vs. Profit Not Guaranteed Reservations Received > Cancellations > Arrivals No Shows Rates we charge Transfer Expenses Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 95
  • 96. Introduction to Revenue Management Parameters to measure efficacy REVPAR: Room Revenue per Available Room TREVPAR: Total Revenue per Available Room TREVPEC: Total Revenue per Client GOPPAR: Gross Operating Profit per Available Rooms Conference/ REVPAM: Conference/Banqueting Revenue per Available M2 REVPASH: F&B Revenue per Available seats and hour Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 96
  • 97. Introduction to Revenue Management When we obtain more by applying RM Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 97
  • 98. Introduction to Revenue Management Where to obtain more by applying RM Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 98
  • 99. Introduction to Revenue Management How much you’ve obtained by applying RM Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 99
  • 100. Introduction to Revenue Management Practice: How to determine our prices Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 100
  • 101. Introduction to Revenue Management Pricing Matrix Pricing Matrix – General RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 101
  • 102. Introduction to Revenue Management Pricing Matrix Pricing Matrix – Very Low Season 100% 75% 50% 25% 99% 66% 33% RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 102
  • 103. Introduction to Revenue Management Pricing Matrix Pricing Matrix – Low Season 100% 75% 50% 25% RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 103
  • 104. Introduction to Revenue Management Pricing Matrix Pricing Matrix – Mid-Season 99% 66% 33% RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 104
  • 105. Introduction to Revenue Management Pricing Matrix Pricing Matrix – Mid-to-High Season 100% 75% 50% 25% RACK RACK PREF PREF BAR1 BAR1 BAR2 BAR2 BAR3 BAR3 BAR4 BAR4 BAR5 BAR5 BAR6 BAR6 WKD1 WKD1 WKD2 WKD2 Standard Standard 200 200 160 160 140 140 120 120 110 110 100 100 90 90 80 80 70 70 60 60 Superior Superior 215 215 175 175 155 155 135 135 125 125 115 115 105 105 95 95 85 85 75 75 Suite Suite 230 230 190 190 170 170 150 150 140 140 130 130 120 120 110 110 100 100 90 90 Hotel Revenue Management Seminar – Miami Beach, FL - 7 May 2013 Presented by: Tomeu Pons tomeupons@gmail.com @tomeu_pons 105