19 Questions on Hospitality Revenue Management - Exam 2 Review | HTM 4454, Study notes of Tourism Economics and management

Download 19 Questions on Hospitality Revenue Management - Exam 2 Review | HTM 4454 and more Study notes Tourism Economics and management in PDF only on Docsity! 15 Multiple Choice 4 Short Answer (given 5, answer 4) HTM 4454: Revenue Management Exam 2 Review Cannibalization (2Q, 1SA) What is it/ How to control it ? When the introduction of a new rate reduces the demand of an existing rate. You control it with effective fencing. - Let’s say that you set you typical $150 rate at $120 so that you can ensure you get more bookings since you are behind what your forecast said you should be. Without the discount you are able to book 250 rooms, with the discount you are able to book 300. That’s means that you will have a net loss of $1500. Had you settled for the 250 rooms at a rate of $150, your net income would have been 37500. But since you sold 300 rooms at the rate of $120, making only $36000, you lost $1500 for selling 50 more rooms. This shows the importance of effective rate fencing. Forecasting (4Q, 1SA) Process – historical / current / future / insight - Always forecast by segment rate (ex. rack rate, continuing through rate structure, etc) Time series data (stationary / non-stationary) - Stationary does not have a trend. Uses simple moving average. - Non-stationary is one that does have a trend. Uses weighed moving average. Forecasting methods for each - Simple moving average for stationary - Weighted moving average -N=4 - add last data values and divide it by 4 - WMA (n=4) -> .1*(2013)+.2*(2014)+.3*(2015)+.4*(2016) - The more stable the trend the bigger the n. Common Mistakes - MOST common mistake by far is not correcting for days of the week when forecasting - Becoming mesmerized by the numbers and forgetting to forecast for new events Error calculation - Error = Actual - forecast - % Error = error/actual revenue - MAPE (mean absolute percentage error) = the average of the sum of all % error Seasonality issue (how to deal with it) - Critical lesson - NOT forecasting for a date, we’re forecasting fro a day - “The 3rd Wednesday of August” as opposed to “August 23rd” - Adjust database for that Booking Curves (3Q, 2SA) Group curve = tends to be an S curve Transient = tends to be exponential curve Importance -Heart and soul of revenue management Pace reports (OTB vs Forecast) - Occupancy and availability reports - Total number of rooms - Continuing guests - Unsellable rooms - Number of rooms reserved (typically by rate) - Number of rooms held or “blocked” (group and contract blocks) - Sellable rooms (available) - Compared to forecasted - Anticipated ADR of reserved/held rooms - Compared to budget/ forecasted revenues - Weekly STR Star Report Data - Action items Usage - Forecast performance measure - Make decisions on allocation of rooms and discount Forecasting with a historical booking curve - the concept of “anticipated room pick-up” = current booking/ % of bookings normally had at that point Inventory Management (2Q) Room classification - Classify room based on perceived value by customer - Want to create as many variations Room allocation - Better rooms better rates - Better rooms better customers Upselling / upgrading - Upselling - when people check in , you ask if they would like to pay a little extra for something more - Upgrading is rewarding the customers that are loyal - typically done at booking, pre-arrival intervals, at arrival Rate Fences (2Q) What types of fences – when and why - Physical - represent differences in the room so it applies to all rates. The higher the discount the higher the fence - Non-Physical - transaction fence, length of stay fences Overbooking and Cancellations (2Q, 1SA) Management actions