Hotel Management: Revenue Management e ruolo del Revenue Manager

Luiss Dipartimento Management

Hotel Management Overview

Luiss Dipartimento Management HOTEL MANAGEMENT "International Hospitality Management: Strategy, Innovation and Cultural Contexts" LUISS Youngah GuahkRevenue Management

Luiss Revenue Management (RM)

Defining Revenue Management

LUISSRevenue Management (RM) "the right product, for the right price, to the right person, in the right period and the right place." HOTEL $ BOOKED LUISS 3Revenue Management (RM) · Revenue Management is a process of revenue maximization through constant price adjustments. . It is based on dynamic pricing. · Hotel pricing is a complex process that was initially described in terms of 'yield management' but is now routinely termed 'revenue management'.

LUISS 4Revenue Management (RM) . The fundamental goal of revenue management is the optimization of room sales. . The hotel room price is always important to the customers and hotels: . If a hotel room is not sold for the night, the hotel loses revenue. . The price is one of the most determining factors in customer hotel selection. · The RM is based on a series of interlinked: · Observations about consumer behaviour (timing of booking) · About the timing of demand for hotel accommodation · Price sensitivity of different types of consumers

Revenue Manager Role

Responsibilities of a Revenue Manager

LUISS 5Revenue Management (RM) What does the Revenue Manager do? . He or she is responsible for making decisions that optimize a hotel's RevPAR. · Assumes responsibility for optimizing hotel revenues via effective room pricing and inventory management. · In larger hotels, this may consist of one or more full-time positions. . In midsize to smaller hotels, The front-office manager (FOM) and/or DOSM may serve in this role and make recommendations to the GM. . In very small hotels, GM will take this responsibility.

Factors Affecting RevPAR

LUISS 6Revenue Management (RM) · Revenue Management . RevPAR is affected by both the rate at which rooms are sold and by the number of rooms sold. · Type of customer, how many rooms, which period? · Length of Stay is also important factor (LOS), WHY? . Labour cost at FO and housekeeping less for the stay-over rooms · Room rate management . Guests are searching lodging alternatives and making price comparisons when selecting their hotels. · Location and price (room rate) . Guests receive the information from various sources · CRS (hotel's franchisor-operated or independently affiliated), · Property own website · Distribution channels (e-distribution channels)

Shared Room-Rate Management

LUISS 7Revenue Manager Tasks Room Rates FOM Tasks DOSM Tasks FIGURE 7.1 Shared Room-Rate Management Responsibilities · Internet search engines . The rates by the guest be identical or internally consistent · Rate on a website and all other distribution channels should be monitored regularly. . The marketing plan should consider the hotel's competitors, bookings history, rate resistance, demand forecasts

Room-Rate Economics

Principles of Room-Rate Economics

LUISSRoom-Rate economics . Room-rate Economics: the processes by which revenue managers price rooms while considering how consumers may react to pricing strategies used. · Law of demand The concept in economics that recognizes, when supply is held constant, an increase in demand typically results in an increase in selling price. · Law of supply The concept in economics that recognizes that, when demand is held constant, an increase in supply typically leads to a decreased selling price. . A hotel need to accurately forecast demand . They can determine the best rates to be assigned to each of their room types

Hotel Room Rates

Types of Rates

LUISS 9Different types of rates · Rack rate, cooperate rate, internet rate, seasonal rate, group rate, government (Military) rate, special event rate, AAA rate, airline rate · Day rate, half day rate · Package plans, meal plans · advanced purchased rate, fade rate (flex rate) · Negotiated rate & blackout date

Sample Hotel Rack Rates

Room Type Rack Rate Standard Double $ 109.00 Standard King $ 119.00 Executive Double $ 149.00 Executive King $ 164.00 Executive Double (Concierge level) $ 199.00 Executive King (Concierge level) $214.00 Double Parlor Suite $ 269.00 King Parlor Suite $ 289.00 FIGURE 7.2 Sample Hotel Rack Rates

Hotel Brands and Discounts

LUISS 10Participating Hotel Brands & Resorts Get the best deals available on every hotel stay with any of these top rated properties in partnership with HotelPlanner offering AAA membership discounts around the globe Best Western International - Save upwards of 20% in the U.S., Canada, and at participating locations worldwide. AAA Preferred Best Western Rewards Program members can earn 10% bonus points with each stay, and children under 12 stay free with an adult. Choice Hotels - AAA membership discount up to 10% off at participating hotels. Hilton Hotels & Resorts - AAA members can save 5% or more. Children under 12 stay free with an adult. Hyatt Hotels & Resorts - Get 10% off and receive a complimentary breakfast for two at select hotels & resorts in the U.S., Canada and Caribbean. Marriott Hotels - Members can save 5% or more and children under 17 stay free with an adult. Starwood Hotels & Resorts - Savings of up to 15% and complimentary breakfast for two daily with AAA.

Pricing Strategies

Maximizing Hotel Profits

LUISS 11Pricing Strategies . Hoteliers wanted to maximise their profits and charge the highest rate possible for the rooms. . But the rate can't be so high that it discourages guests . Also can't be so low that it prevents the hotel to continue . The room rate should be resulted from a rational examination of guest demand and a hotel's costs of operation. · Hubbart room rate formula · Developed in the mid-1950s

Hubbart Room Rate Formula Computation

LUISS 12Step 7 Calculate the hotel's required ADR. Step 6 Step 5 Forecast the number of rooms to be sold based upon estimated occupancy. Step 4 Determine the total room revenue required to meet the hotel's goals and obligations. Calculate nonroom's profits. Step 3 Calculate all operating costs. Step 2 Calculate all fixed expenses. Step 1 Calculate the hotel's target profits. LUISS FIGURE 7.3 Computation of the Hubbart Room Rate FormulaHubbart Room rate formula · Step 1: Calculate the Hotel's target profit · multiply the owner's investment by the required return on investment (ROI) · Step 2: Calculate all fixed expenses · include accurate estimates of all fixed costs including leases, depreciation, interest expense, property taxes, insurance, mortgages, and fixed management fee. · Step 3: Calculate all operating costs . include expenses directly associated with selling and cleaning rooms and providing food services. All the costs incurred to operate the front office would be included. Additional direct operating costs include housekeeping-related expenses for labor, guest room supplies, and laundry as we as the cleaning the hotel's public spaces. F&B department expenses also considered a direct expense of selling rooms. F/O, F&B and housekeeping's indirect operating expenses must be computed. · Step 4: Calculate nonroom's profit . e.g. telephone tall charges, internet connection fees and other minor source unique to the hotel.

Hubbart Formula Steps

LUISS 14Hubbart Room rate formula · Step 5: Determine the total room revenue required to meet the hotel's goals and obligations . Sum the owner's desired investment return, the hotel's fixed expenses, direct expenses and all indirect operating costs. Then Subtract the amount of nonroom's profit anticipated by the hotel · Step 6: Forecast the number of rooms to be sold based upon estimated occupancy . Multiply the number of rooms available by the projected occupancy rate · Step 7: Calculate the hotel's required ADR . Divide the required room revenue by the the number of rooms to be sold

Web-Influenced Pricing Strategies

LUISS 15Revenue Management (RM) · Hubbart formula is still used: · Providing an adequate return to the hotel's owner(s) . Recovers the hotel's fixed costs . Considers the hotel's operating costs . Accounts for all the hotel's non-room net income . Results in a definite and finally justifiable ADR goal . Web-influenced pricing strategies: non-traditional methods to establish the pricing. · competitive-pricing - charge what the competition charges . follow-the-leader - charge what the dominant hotel in the area charges · Prestige pricing - charge the highest rate in the area LUIS Biscount Pricing - reduce rate

Revenue Management Essentials

Forecasting and Occupancy Management

16Revenue Management - the essentials Forecasting . Rooms available to sell · Estimated room to be sold . The estimated occupancy rate . the estimated ADR · The RevPAR estimate . Non room revenue is also important (e.g., F&B, banquets, meeting rooms etc) Occupancy management · Minimum Length of Stay Strategy (MLOS) - A hotel requires guests who seek a room to stay for a designated minimum number of nights. . Closed to Arrival (CTA) - Hotel declines the reservation for guests · Overbooking (oversold)

ADR and RevPAR Management

LUISS 17Revenue Management - the essentials ADR management . The best way to maximize ADR is to manage room rate in conjunction with anticipated demand. · The goal is to achieve an ADR that is as close as possible to the hotel's rack rate RevPAR management · RevPAR - Occupancy% X ADR Yield management: A demand forecasting systems designed to maximize revenue by holding rates high during times of high room demand and by discounting room rates during times of lower guest room demand.

Yield Management Philosophy

LUISS 18Revenue Management (RM) · Yield Management Philosophy . The airline industries varied its pricing in response to changes in consumer demand. They did so by varying prices based on: · Service levels provided . Yield Management implementation: YM techniques are employed to · Accurately forecast demand · Minimize rate discounts in high-demand periods . Use MLOS and CTA to maximize revenue in high-demand periods . Increase discounts during low-demand periods · Implement special event rate during periods of extremely heavy demand

Measures of Effectiveness

LUISS 19Revenue Management - essentials · Measures of Effectiveness · Occupancy index Occupancy Index: A ratio measure computed as: Occupancy rate of a selected hotel Occupancy index Occupancy rate of the selected hotel's competitive set · ADR index ADR Index: A ratio measure computed as: ADR of a selected hotel ADR of the selected hotel's competitive set = ADR index · RevPAR Index RevPAR of a selected hotel RevPAR of the selected hotel's competitive set RevPAR index LUISS 20