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Key Results Glossary
GOPPAR: GOPPAR, or Gross Operating Profit
Per Available Room, is defined as total gross operating profit (GOP) per available
room per day, where GOP is equal to total revenue less the total departmental and
operating expenses.
What: GOPPAR provides a deeper indication of a
hotel’s profitability by taking into consideration management control and efficiency.
In addition, GOPPAR offers an overall more robust performance measure, especially
when comparing the financial performances of hotels with different sizes or in different
markets. Furthermore, GOPPAR has a significant correlation with a hotel’s bottom
line and thus its underlying value.
How: The GOPPAR of a future group or meeting may
be determined by calculating the Guaranteed Group Revenue pro rated on a per Occupied
Room basis (Group GOPPOR). Group GOPPOR is occasionally used by Revenue Managers
and Hotel salespeople to choose between two or more overlapping groups or to establish
the threshold rate for a future set of dates based on historical performance and
market factors.
Group GOPPOR: Group Gross Operating Profit
Per Occupied Room (Group GOPPOR) is a measure of profitability of a specific group
or conference for a particular hotel.
What: GOPPOR is a metric used with increasing
frequency by Hotel salespeople to determine the amount of meeting space and other
hotel resources to allocate to a meeting in comparison to the group’s total profitability.
How: Group GOPPOR is determined by calculating
each departmental revenue stream (Rooms, F&B, AV, Spa, etc.) derived from the
Group, less the departmental operating costs incurred by the Hotel in servicing
the Group in each of those areas.
RevPOST: Revenue per Occupied Space Time (RevPOST)
is a measure of the Revenue Efficiency of a Group or of a Hotel’s utilization of
its Function Space.
What: Unlike Rooms vs. Space Ratio, which is an
internal hotel measures of a group’s usage of Hotel resources without respect to
Revenues or Profitability, RevPOST may be used by Hotels, Meeting Planners, Revenue
Managers, and financial analysts to compare the Revenue performance of different
hotels in their markets.
Why: RevPOST may be used by hotel salespeople
and Revenue Managers to determine the Revenue Efficiency of different groups that
overlap similar or identical dates, as well as to establish budgetary goals for
preferred patterns offered by a Hotel to groups. RevPOST can also be applied to
most global markets when expressed as RevPM2 (Revenue Per Meters Squared) or RevPKSF
(Revenue per Square Foot X 1,000). As the size, scope, and frequency of conference
and incentives continues to increase worldwide, RevPOST has grown in importance
as a fundamental metric used to monitor the Revenue performance and booking efficiency
of hotel salespeople.
RevPAR: Revenue Per Available Room, or RevPAR,
is a metric commonly used to measure financial performance in the hospitality industry.
RevPAR is a function of both room rates and occupancy, and is one of the most important
gauges of performance among hotel operators.
What: RevPAR is used by Hotel Management and analysts
to determine the Market share and Year-Over-Year performance of a hotel. Total revenue
per available room (Total RevPAR) is the product of (a) occupancy and (b) Total
RevPOR.
Rising RevPAR is an indication that either occupancy is improving, or room rates
are rising -- or some combination of both. Of the two, rising room rates have a
much more dramatic impact on the bottom line than corresponding increases in occupancy.
It is not uncommon to see both figures rise together, though, as higher occupancy
is usually concurrent with a stronger pricing environment.
RevPAR evaluates the strength of only one type of revenue-generating stream, and
it is important to note that many hotels derive a substantial portion of their total
revenues from restaurants, spas, casinos, conferences, and other incremental revenue
streams.
How: How does this affect meeting planners? As
a meeting planner, you will benefit by understanding your meeting's effect on a
hotel's Rev PAR - depending upon whether you book it at Hotel A or if you book it
at Hotel A's competitor - which will make you a better negotiator. RevPAR = AO%,
where…
* RevPAR is revenue per available room,
* A is the ADR, the average price per room sold,
* O% is the rate of occupancy, or percentage of rooms sold.
RevPAST and RevPOST: Revenue Per Available
Space-Time (RevPAST) and the associated Revenue Per Occupied Space Time (RevPOST)
are ratios designed to measure the efficiency of Total Sales gained via the occupancy
of a Hotel or Convention Center’s Meeting Space or Function Space.
How: Revenue Management strategies can be designed
to attain certain revenue goals in relationship to the timing, availability, quantity,
and marketplace demand of specific meeting space utilized by a group or overlapping
groups. For example, a baseline can be established by a hotel or other venue to
determine the historical market performance of a particular meeting room or convention
space and sales strategies (pricing, incentives, stipulations) can be implemented
to maximize revenues captured by the Hotel or venue for each particular Meeting
room or the overall hotel. See also "Rooms-to-Space Ratio."
RevPOR: Revenue Per Occupied Room, or RevPOR,
is one of the most important measures used by Hotels to evaluate the Revenue Contribution
of a Group. RevPOR is most often viewed by Revenue Managers in comparison to budgeted
targets, anticipated demand, and Year-Over-Year figures in order to determine the
rates, concessions, and contract terms offered to Meeting Planners.
What: RevPOR is used in conjunction with, or in
place of, the more standard revenue per available room (RevPAR) statistic. RevPAR
is calculated by taking the RevPOR value and multiplying it by the occupancy rate.
RevPOR may also be expressed as "total RevPOR", which includes not only
the room rate itself, but also any extra services such as group F&B, Audio-Visual
rentals or commissions, room service, laundry services and in-room movie viewing,
among others.
RevPOR is used by analysts to determine the total revenue and profit potential of
a company; occupancy rates will rise and fall with the general and local economy,
but RevPOR is a metric that stands independent of how full the hotel is at any point
in time.
How: Revenue per available room (RevPAR) is the
product of (a) occupancy and (b) ADR. Total revenue per occupied room (Total RevPOR)
is calculated by dividing total resort revenue (including revenue from rooms, food
and beverage, and other amenities) by total occupied rooms.
Rooms vs. Space Ratio: A metric used to determine
the space allocation that a hotel can profitably offer a group in relationship to
the number of guestrooms occupied by the same Group. Because guestrooms are a Hotel’s
foremost source of profits, and because meeting space is used to attract groups
to a Hotel as the venue for a group’s event, Hotels must make smart decisions about
how, when, and what space to assign to groups.
What: A group that consumes significantly more
meeting space than the number of guestrooms occupied is commonly viewed as displacing more profitable group opportunities that
may materialize at a later date. Meeting Planners seeking to book such space-intensive
groups are often confronted with substantial Meeting Room Rental charges as Hotels
seek to recover displaced Rooms Profit via increased Meeting Room Rental in order
to strike a balance between the profit goals of the Hotel and the displacement of
Occupancy.
How: Rooms vs. Space Ratios are calculated in
relationship to the percentage of a Hotel’s total Meeting Space occupied by a group
vs. the percentage of the Group Rooms allocation of the Hotel occupied by the Group
during the same dates.
Groups with extensive breakout or syndicate meeting needs, several days of advance
set-up for production or exhibitions, and relatively small room blocks are viewed
as being less attractive to a Hotel than more profitable groups which utilize less
meeting space in relationship to their guestroom usage and overall revenue profile.
Unconstrained Demand: Unconstrained demand
is the level of demand that occurs for a given perishable asset [such as Hotel guestrooms
and Meeting Space] without reference to the price levels that the seller will ultimately
select to constrain it. Unconstrained demand is a way to answer the question: "What
is the most that we could sell at a uniformly low price?"
Why: Revenue Managers and Hotel Salespeople are
tasked with identifying the level of Unconstrained Demand by logging the number
and reasons for groups that are not booked in
a given market. At the conclusion of an unsuccessful negotiation, Meeting Planners
are often asked "Where did the group go?" or "Why did you select X as the Hotel?"
These questions are designed to determine the level of Unconstrained Demand for
the market at that point in time. Many hotels also record the number and size of
groups that they rejected (Denials) due to space issues, low rate tolerance, or
previous groups booked. Revenue Managers use all of this data in aggregate to fine
tune their Demand Curve calculations and adapt their pricing strategies to the market
Revenue Management Glossary
4 P's Product, Price, Place, Promotion ... terms
used in Marketing to describe the fundamentals of an integrated approach to Revenue
Management.
Attrition Refers to a reduction, either voluntarily
or involuntarily, or a group’s contracted room block. Voluntary Attrition (or Attrition
Allowance) is normally tied to an agreed percentage of reduction in a guestroom
block contractually permitted by a specific date or series of dates prior to group
operation. Voluntary Attrition is usually allowed by the Hotel with no financial
penalties. Involuntary Attrition refers to attrition in excess of any agreed amounts
due to a failure of the forecasted number of rooms to materialize, early departures,
or failure to account for group guestrooms that may have been used at the Hotel
but are not recorded as part of the group block. Involuntary Attrition usually means
that a payment equal to the difference between the Minimum Guaranteed Room Block
(net of Allowed Attrition) and the Actual Group Rooms Usage will be paid to the
Hotel by the Group.
Average Rate or Average Daily Rate (ADR) Average
rate is a measure of the weighted average price or rate for a given perishable asset
based on the number of units sold at the different price levels. An example in the
hotel industry occurs when rooms with two queen-sized beds are sold at different
prices (for example, rack rate, corporate discount, tour promoter package, group
rate, etc.). In this case, average rate acts as a pricing efficiency measure.
Blind Cut A term used in the Hotel industry
that refers to an arbitrary and undisclosed reduction of a Group’s contracted room
block as a reaction to increased market demand at higher rates or a lack of confidence
in the group’s ability to fully materialize. The reduction is "blind" because it
is undisclosed to the Group and/or its meeting planner.
Buckets The term "buckets" is often
used by revenue management specialists to describe the different rate classes that
are used in variable pricing, in the context of a model that is aimed at maximizing
revenue across the various buckets. Northwest Airlines uses this term, for example,
in its own revenue management activities. See "Segmentation."
Capacity In a revenue management context,
capacity is a crucial aspect of the perishable good or service. The limited capacity
available at a given point in time --say, airline seats on the first flight out
of Minneapolis on Monday morning to Los Angeles -- is what prompts a revenue managers
to carefully think through how to maximize revenue yield. With limited capacity,
the revenue manager uses variable pricing policy to steer demand so as to even it
out and maximize load factors across a fleet of airplanes. In the process, the goal
is to maximize revenue yield. Load factor is an airline industry term that describes
what percentage of the seats is filled on an airplane. Think of it as a "raw"
efficiency measure -- one that is unadjusted for its impacts on revenue yield.
The Capacity of a comparative set or Hotel Market Segment is a key aspect of any
hotel revenue management model and may fluctuate due to factors such as property
expansions, renovations, conversions to condos, or new hotels entering the market.
For example, hotels may self-select their market segment as being included in "5-star
Luxury rooms in Midtown Manhattan." This market segment differs from the market
segment of "5-star Luxury rooms in the Wall Street Financial District" and hotels
model their pricing tactics accordingly.
Comparative Set Forecasting A technique that
allows hotels to predict their fair share in RevPAR for future months. When this
technique is used, a hotel company that attempts to make an accurate forecasting
of their competitor’s performance will have the opportunity to model the outcomes
of their own revenue management policy choices in the light of the competitive nature
of the marketplace.
Consumer's Surplus A term that is often used
to describe the amount of revenue that is lost to producers and sellers through
the choices they make about how to price their goods and services.
CRM Customer Relationship Management. The
CRM aspect of Marketing is tied to Revenue Management via its tagging of previous
Customer Pricing and purchasing behavior as a method of determining future customer
buying behavior. At major hotel companies, every previously booked group of virtually
every major client organization is included in their proprietary databases, and
this information is used to target promotions, build rate controls, and structure
or limit concessions provided by hotels during future negotiations.
Demand Curve The functional relationship between
price at different levels and quantity (or demand) that describes consumer behavior
in a marketplace. Sophisticated models based on previous baseline market behavior,
economic trends, marketplace supply expansion/contraction, and other factors are
created for Hotels to implement pricing and stay controls in regional markets. An
example of such a Demand Curve algorithm, based on Microeconomic Consumption Theory,
is depicted below
log(Dx)t = a + b * log(RADRx)t + g * log(RADRx)t + ¶ *
log(GDP)t + et
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This algorithm posits that the Demand for goods and services is a function of current
income, expectations of future income, the price of goods and services, and the
price of the substitutes.
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Denial A denial occurs when a reservations
agent tells a customer that they cannot book at a given rate (a hotel room, airline
ticket, etc.), when the capacity still exists to fulfill that demand. Denials are
characteristic of the Yield Approach and the Revenue Approach in managing the reservation
making process to maximize revenues.
EBITDA Earnings Before Interest, Taxes, Depreciation,
and Amortization. A standard hotel financial metric used by managers and owners
of hotels to determine a hotel’s Rate of Return or ROI.
Food & Beverage Minimum An aspect of hotel
contracts since its introduction in the early 1990’s, F&B Minimums are a contractual
guarantee of the revenue value of a group’s F&B program during its occupancy
of a Hotel. F&B Minimums are a means of Revenue Control exerted by the Hotel
in return for its allocation of resources (guestrooms, meeting space) to a Group.
F&B Minimums are usually variable by dates and marketplace demand for a Hotel’s
services. Hotels may internally budget to achieve group F&B targets that are
expressed as F&B per Occupied Room (F&BPOR) or F&B
RevPOST.
History Data concerning a group’s previous
purchasing activity with other hotels for a specific meeting. Prior to contracting,
hotels often ask Meeting Planners for the identities of other hotels and the operating
dates during which they have previously operated a meeting. Meeting Planners often
willingly supply this information, which is in turn used by hotels to determine
the rates tolerance, scope, and other aspects of its offer to the group! Oddly,
Meeting Planners rarely ask hotels to supply them with similar historic information
such as the identities of other groups that operated at the hotel during the same
or similar dates in the past so that planners can gain references on the hotel from
previous users.
Hurdle Price Line
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 The RevPOR or RevPOST price point at which the optimization
of unconstrained forecasted demand directs Revenue Managers and Hotel salespeople
to proactively not accept any bookings below a total revenue level as described
by the calculation:
(R + F&B + A) ÷ by Total Rooms Occupied
or
(R + F&B + A) ÷ by Total Meeting Space Utilized
and/or
[(R + F&B +A) ÷ (Total Rooms vs. Space Utilized)] X Pattern or Stay Control
…where R is Room Revenue, F&B is planned or guaranteed Group Food & Beverage
Revenue, and A is Ancillary Revenue such as Spa, Audio-Visual, Meeting Room Rentals,
etc.
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It is important to note that Hurdle Prices are dynamic and vary by time-to-operation,
Demand Curve factors, pattern, and space availability for any set of dates under
consideration.
Load Factor The percentage of seating or cargo
capacity that is utilized, typically on an air carrier or freight carrier.
Net Profit Margin Net profit (or loss) before
interest and taxes as a percent of operating revenues. Also known as Net Operating
Income (NOI).
Occupancy Rate Occupancy Rate in the hotel
industry is a measure of the observed occupancy percentage of a hotel property on
any given night. Occupancy rate is often used as a measure of performance, especially
when the managerial perspective is the Percentage Sold Approach. However, today
most firms that utilize modern revenue management practices recognize that this
is only a secondary measure compared to revenue yield, which maximizes revenue --
even when some rooms go unsold on a given night.
Opportunity Cost Opportunity Costs occur when
a revenue manager sells a room in a hotel at a lower price level and subsequently
experiences materialized demand for the same room at a higher rate. Opportunity
costs occur either in a real or actual way, or in an expected sense: with
stochastic demand, the revenue manager is never quite sure of the actual
opportunity costs for a given room, because demand is uncertain to materialize.
However, it is possible to compute expected opportunity costs on an ongoing basis
from historical marketplace demand data, and then use that information to refine
pricing policy and the time of rate closeouts.
Overbooking Overbooking occurs whenever the
number of seats on an airline or rooms in a hotel that are sold for a given flight
or night, respectively, exceeds the number of seats or rooms available. Overbooking
occurs because revenue managers face stochastic demand
patterns, and in order to fill their seats or rooms at some point in the future,
they take a risk that some customers, who represent demand today and have reserved
space, will not materialize as actual demand on the date of delivery.
Override An override occurs when a revenue
manager rejects the recommendations of a computer-based revenue management demand
forecasting and price-setting system, and chooses other prices. Overrides occur
when the decision maker perceives the local demand patterns to be at odds with those
utilized by the model. In other cases, however, overrides occur due to a lack of
trust in the model and the technological approach towards decision making, resulting
in a loss of decision-making power on the part of the revenue manager. Overrides
are often requested by hotel salespeople who are frequently at an information or
empowerment disadvantage vs. their own Revenue Manager.
Percentage Sold Approach The Percentage Sold
Approach emphasizes volume sold across all product classes in the product mix, and
is therefore inconsistent with selling to maximize revenue. With this approach,
very often more of the discounted classes in the product mix are sold. The Percentage
Sold Approach was the traditional approach to the Group Market used by Hotels until
the application of Revenue Management techniques in the Group Sales operations of
most major hotel companies during the period 1997-2005.
Perishable Asset A perishable asset is one
that, if not sold today, represents a lost opportunity for revenue for the firm.
Examples include: an empty airline seat on a flight from Minneapolis to Denver on
October 12, 2003; an unbooked hotel room at the rack rate at the local Holiday Inn;
a half-empty freight truck driving on a delivery from Chicago to Memphis; an unsold
ticket to the Chicago Bulls vs. Washington Wizards basketball game on a specific
date in 2007.
Predictive Analytics The practice of mathematically analyzing vast amounts
of customer purchasing data, comparative set performance, economic trends, and customer
performance data to determine the optimal pricing, stay control, and contractual
terms to offer customers. Early models of predictive analytics are already in usage
in the insurance industry and applications are under development for use in the
hotel industry.
Price Discrimination Price discrimination
is the practice of setting variable pricing policy, and selling the same product
or service to different customers at different prices. The use of sophisticated
CRM and Predictive Analytic
software has enabled price discrimination tactics to be effective in many industries.
Price Elasticity Price elasticity is a measure
of how much the Quantity Demanded may change from one price level to the next. The
general idea for most Revenue Managed perishable assets is that Demand will decline
as Price increases.
Pricing Mix Pricing mix is the combination
of price types typically selected by the revenue manager for a given product at
a given point in time. Pricing mix often includes the following kinds of rates:
rack rate (standard, without discount, like an unrestricted full fare on an airline),
corporate negotiated rates, advance purchase discount rates, contracted group rates,
incentive and affinity program bargain rates, and so on.
Rack Rate Rack rate is the equivalent of "list
price" in the pricing of perishable goods and services. In the airline industry,
for example, rack rate is the price of a full fare unrestricted ticket. Rack rates
are also typically the highest rates charged by the seller.
Rate Control A rate control is a revenue management
policy aimed at ensuring that a given asset is sold at the highest possible rate,
with respect to what the revenue manager knows about stochastic demand.
Revenue Approach The Revenue Approach, in
contrast to the Percentage Sold Approach and the Yield Approach, is directed at
selling the "right" amount of product, at different price levels, to pull
the greatest amount of value out from under the different price points of the product
demand curve. Both the percentage sold and average price of sales may be less than
under the other two approaches, however, the total revenue should be higher. Since
this approach actually combines elements of the Yield Approach and the Pricing Approach,
but is focused on revenue, this practice has come to be called revenue management.
Hotels increasingly take this approach when they deny space to groups booking 2-3
years prior to operation during peak season dates unless the groups fit an ideal
Pattern of rooms and space occupancy. (See "Stay Control".)
Revenue Management: is a technique to optimize
the revenue earned from a fixed, perishable resource. The goal of Revenue Management
is to maximize revenues by selling the right resources to the right customer at
the right time for the right price.
Revenue management implements the basic principles of supply and demand economics
in a tactical way to generate incremental revenues. There are three essential conditions
for revenue management to be applicable
- There is a fixed amount of resources available for sale.
- The resources sold are perishable. This means that there is a time limit to selling
the resources, after which they cease to be of value.
- Different customers are willing to pay a different price for using the same amount
of resource
These three conditions are readily met in the context
of hotel group meeting contracts.
- There are a fixed and specifically defined number of rooms and quantity of meeting
space available for sale.
- Hotel resources for groups are highly perishable. Due to the advance time required
to plan for and manage a group, the window of opportunity during which a hotel may
successfully sell, contract and prepare for a group typically disappears at a time
well prior to the dates allocated. The time limit for selling hotel resources is
more limited and thus more perishable than the time limit for selling individual
room reservations or simple catering events.
- Group pricing at hotels can vary widely due to the significant variation in a group’s
willingness to pay, the suitability of Hotel resources to a group’s specific needs,
and availability of similar hotel resources that a group might also consider, and
the timing of the group’s purchase of the hotel’s resources in relation to the Demand Curve
Additionally, for the third essential condition, hotels maintain extensive and sophisticated
data on individual group customer purchasing behavior and the daily competitive
pricing environment in which their hotels exist. Due to this information advantage,
many hotels can predict with accuracy the price point at which a specific organization
may be willing to secure a group meeting contract for any future program that is
planned. Knowledge of prior purchasing behavior does not assure future performance,
but it is a valuable advantage that hotels have over their customers in any contract
negotiation.
Revenue Yield Manager A revenue or yield manager
is a job title for someone who sets pricing policies for perishable assets in the
hotel industry, the airline industry, etc. This person is typically uses a revenue
management system, and is the one responsible for maximizing revenue yield. This
person is also typically responsible for interacting with whatever other people
in the firm or outside the firm are involved in understanding whether a given day's
demand patterns and future forecasted demand patterns are in the range of the forecast
ability of the revenue management demand forecasting model of the system. We often
find revenue managers at the "cluster" level in the hotel industry, and
not at the property level, since demand for hotels has both regional and local components.
Revenue Managers at hotels are often viewed as gatekeepers and are in frequent contract
with a hotel’s group salespeople as they determine which groups to Contract, Deny,
or place on a time-restricted Option to Buy (Tentative Hold, 2nd Option).
RevPAR RevPAR is a common metric for hotel
room revenue performance, defined as: total room revenues / rooms available RevPAR
means "Revenue per Available Room," and thus is an efficiency measure.
Segmentation Segmentation is the process of
associating different pricing levels in the marketing mix with consumers of different
demographics. Segmentation in revenue management implies that individual customers
have different levels of utility at a given point in time, and hence, are likely
to express different levels of willingness-to-pay for a good or a service. See "Buckets."
Stay Control A Stay Control is a policy tool
applied in Reservations. Revenue Managers -- at least in hotel and rental car settings
-- tend to prefer bookings with a longer duration than with a shorter duration.
So a weekly rental reservation may be preferred to a two-day rental reservation
for a given class of product in the car rental business. Example: try to rent a
SUV for a weekend in the Canadian Rockies at the height of the summer tourism season.
It can't be done -- even with lots of advance notice! Two-week rental arrangements
are rarely a problem though. Reason: rental car company stay controls aim to maximize
revenue yield.
Stochastic Demand Stochastic Demand occurs
when it is possible only to estimate the demand that will materialize in the marketplace
in the future in terms of the descriptors of a statistical distribution: mean demand,
variance in demand, and some kind of characteristic distribution (for example, the
normal distribution). Stochastic Demand is used when more specific or relevant demand
indicators (citywide convention activity, NYC Marathon, summer in Paris) are unavailable.
Unconstrained Demand Unconstrained demand
is the level of demand that occurs for a given perishable asset without reference
to the price levels that the seller will ultimately select to constrain it. Unconstrained
demand answers the question: "What is the most that we could sell at a uniformly
low price?"
Variable Pricing Variable pricing is the practice
of selling the same product at different price levels to different consumers. When
you take an airplane trip sometime, quiz the people sitting around you about what
they paid for their tickets. Many airlines operate flights with 20+ pricing buckets,
an indication of their reliance on revenue management for profitability. For the
same reason, hotels also routinely offer 8-20 different prices to customers for
reservations during the same dates for rooms of identical or very similar quality
Walk A walk, euphemistically also called a
"Referral," occurs when an overbooking that occurred relative to stochastic demand
in the past by the revenue manager results in the overbooked customer actually arriving
at the gate to take the flight, or arriving at the hotel to stay the night. If there
is no capacity at all -- as is often the case with hotel rooms where capacity is
strictly limited -- the hotel manager "walks" (or makes alternative arrangements
for) the customer to another hotel for which there exists a "walk reciprocity
policy." Under conditions of heavy demand, hotel operators benefit from this
kind of collusion.
Willingness-to-pay Willingness-to-pay on the
part of a consumer of a product or service is an economic expression of the consumer's
specific level of utility. In general, the consumer's willingness to pay, at the
limit, should be indicative of the value they attribute to the product or service.
Yield Approach The Yield Approach focuses
on sales of the higher priced product classes. One expects the volume or percentage
sold of the product to be less, however, it is entirely possible that the actual
revenue achieved will be higher. One thing is certain: the yield approach typically
maximizes the average price of sales. It has been observed that the application
of sophisticated Revenue Management techniques at a Hotel quickly adds 7-10% in
revenue vs. the Hotel’s prior performance during comparable periods.
Yield Management Yield management is a systematic
approach to maximizing the return on perishable assets, normally in the form of
revenue, in such businesses as car rental, hotel operation, airline seat ticket
sales, television advertising slot scheduling, truck freight booking, and railcar
shipment scheduling. The idea is to sell a perishable asset today at a low price,
if you think it will go unsold. But yield management also means waiting to sell
something tomorrow at a higher price, if there is overlap in when the good or service
will be consumed. Example: a multi-day stay at a luxury hotel.
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