Exam 1 Review - Revenue Management | HTM 4454, Study notes of Tourism Economics and management

Download Exam 1 Review - Revenue Management | HTM 4454 and more Study notes Tourism Economics and management in PDF only on Docsity! HTM 4454: Revenue Management Exam 1 Review L02: Perishability What is it, Implications / So What? - Inability to inventory - Drives revenue management - Can’t inventory the product/experience - Inability to inventory in combination with variable demand, fixed capacity, and high fixed cost percentage -> can cause problems Market Segmentation / Target Markets - Market segmentation- Identification of types or categories of customers based on how they purchase, what they want, and/or how they consume product - Target markets - those segments on which the business focuses and allocates marketing resources Taste heterogeneity – between / within Differentiated / undifferentiated strategies – why. Target Markets - The notion of high value customers High Value Customers - clients on whom survival or profitability of a business depends - they spend the most money on the business & loyal Cannibalization - Reduction in sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer Long Term RM – issue of time structure – peak / shoulder / off periods - Marketing strategy by time period - goal - matching demand and capacity - emphasis on products and market segments L03: Process of Revenue Management Definition / primary aim / essence - Application of disciplined analytics that predict consumer behavior at the micro market level and optimize product availability and price to maximize revenue growth - primary aim is selling the right product, to the right person, at the right time for the right price - the essence of this discipline is in understanding customer’s perception of product value and accurately aligning products, places, placement and availability with each customer segment. - Critical Challenge = high value customers book last; how to work through that - keeping capacity available, the “filler” market - sell up the space we don’t think we can sell to high value customers. Filler markets are more price sensitive, you can manipulate in terms of when they come/don’t come; can go after/target in sales process. Key Processes Creating the RM framework 1- identify key market segments (transient business, transient leisure, group, contract, government) 2- establish initial rate structure (categories and rates)(price portfolio - rack, corporate, group, contract, govt-, generally six months to a year in advance, generally last year’s prices adjusted for anticipated inflation) - Business forecasting 3- forecast inventory 4- forecast demand for each rate - Capacity allocation and inventory controls 5- allocate available rooms to “price buckets” (high to low) 6- create rate fences - implementation 7- forecast “no shows” and cancellations - overbook accordingly 8- distribution channels design and implementation - optimization 9 - report/update the process Issues within each process Measuring Success Why RevPAR Index - different than RevPAR. - compares you to another property - revenue available per room means rooms revenue per available room Value of GOPPAR – why not used more than it is. - Its bottom line - No one reports financial performance data to STR - dramatically better measure than RevPAR Optimization / Pace Reports / Booking Curves L04 Hotel Math Performance Measures OR / ADR / REVPAR - Occupancy Rate (%) = # rooms sold/# rooms available - the percentage of available rooms that were sold during a specific time - Average Daily Rate (ADR)($) = total room revenue/#rooms sold - a measure of the average rate paid for rooms sold during a specific time period - Revenue Per Available Room (RevPAR)($) = total rooms revenue/ # rooms sold - a measure of the revenue that is generated by a property in terms of each room available. This differs from ADR because RevPAR is affected by the amount of unoccupied rooms, while the ADR only shows the average rate of rooms sold Know what they are and how to calculate