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A comprehensive list of definitions and explanations for key terms related to revenue management in the hospitality industry. It covers concepts such as distribution channels, pricing strategies, and revenue optimization techniques. Valuable for students and professionals seeking to understand the principles and practices of revenue management in the hospitality sector.
Typology: Exams
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Travel Wholesaler - Answer: A large-volume travel industry intermediary who sells to other, smaller-volume travel intermediaries Global Distribution System (GDS) - Answer: A group of companies that electronically connect travel-related businesses such as airlines and hotels with those individuals and companies seeking to buy from them Internet Distribution System (IDS) - Answer: The group of online reservation systems and travel portals that utilize the internet to connect travel-related businesses such as hotels with those individuals and companies seeking to buy from them Net ADR Yield - Answer: Net room rate/ Standard ADR = Net ADR yeild Net Room Rate - Answer: Standard ADR - Distribution channel costs = Net Room Rate
GOPPAR - Answer: Total revenue - Managements' controllable expense / Total rooms available for sale = GOPPAR Fade Rate - Answer: A lower room rate offered when a potential rooms buyer exhibits initial price resistance CPOR - Answer: Short for "cost per occupied room." The total incremental expense associated with the sale of one guest room. Examples include Amenities CPOR, Housekeeping CPOR, and complimentary breakfast CPOR Nights (booked) per Check-Out Today - Answer: Nights booked today / Check-Outs today Nights (booked) per Check-Out to Date - Answer: Nights booked to date / Check-Outs to date Shopper Service - Answer: The unannounced, anonymous and professional evaluation of an organization's employee behavior, productivity and customer service skills. Also known as mystery shopper services Commoditization - Answer: The process by which a product (or service) reaches a point in its development where one brand has no features that differentiate it from other brands, and consumers buy based on price alone Call Center - Answer: A physical location, maintained by a brand, for its customers who prefer to book their room reservations via telephone Loaded (rate) - Answer: The point at which a room rate and its companion rate code have been properly submitted for listing by one or more of a hotel's chosen distribution channels
Proprietary Website - Answer: A web address whose content is 100% controlled by a hotel's own management team Search engine results page (SERP) - Answer: The listing of Web pages returned by a search engine in response to a keyword query Conversion - Answer: The proportion of web site visitors who actually make a guest room purchase. For example, if a site receives 100 hits that result in two bookings, the sites conversion rate is 2% (2/100 = 2%) Link Strategy - Answer: The identification and linking of complementary sites (especially high- traffic sites) that improve a hotel's SERP ranking in response to a keyword query Agency Model - Answer: An arrangement in which a hotel pays a commission (historically, 10% of selling price) to an intermediary for selling its rooms Net Rate - Answer: The amount per room actually received by hotel when selling its rooms through an intermediary. Merchant Model - Answer: A system in which an intermediary obtains rooms inventory at a wholesale rate and then acts as a merchant by selling the rooms to buyers at retail rates Referral Rate - Answer: A web site the searches for and reports information found on other web sites. Also known as a scrapping site or meta search site Opaque Model - Answer: A system in which the room buyer does not know the name of the hotel they have chosen until after they have committed to the purchase price the room
Consumer-generated Media (CGM) - Answer: Various online venues such as forums, blogs, wikis, and reviewer sites where those seeking to research and buy products can use information and opinions posted by other consumers before making their buying decision Statistic - Answer: A number or term used to summarize or to describe a larger collection of information. Examples include sums, averages, and ratios RevPAR - Answer: ADR x Occupancy Percentage = RevPAR Income Statement - Answer: A detailed listing of an operation's revenue and expenses for a specific time period. Also know as the statement of income and expense, profit and loss statement, or P&L RevPOR - Answer: Total (Rooms + Nonrooms) revenue / Total occupied rooms Total RevPAR - Answer: The average rooms and nonrooms revenue generated by each available guest room during a specific period of time Total (Rooms + Nonrooms) revenue / Total rooms available for sale Room-related Occupation Costs - Answer: Those rooms-related costs incurred directly as a result of selling a guest room. Examples include labor costs, room supplies, and room amenities Also referred to as room-related occupancy cost, occupied room cost, or cost per occupied room (CPOR) Minimum ADR Sales Point Formula - Answer: The lowest room rate that can be charged and still generate enough revenue to pay all rooms-related occupancy cost plus the cost of any distribution channel commissions and franchise-related fees and royalties paid to create the sale
Rooms-reltated occupancy costs / Net ADR yield % Gross operating profit (GOP) - Answer: Total revenues less management-controllable operating expenses. GOP can be expressed in total dollars or as a percentage of total revenue GOPPAR - Answer: Total revenue - Management-controllable expense / Rooms available to sell Flow-through - Answer: The relative change in profit dollars expressed as a percentage of the change in revenue dollars GOP this year - GOP last year / Total revenues this year - Total revenues last year Market Share - Answer: The portion (or percentage) of sales in a defined region that is controlled by a single company. For example, in a region where 10, 000 hotel rooms were sold last month, a single hotel having sold 2,300 rooms would have had a 23% market share (2,300/10,000 = 23%) Metropolitan Statistical Area (MSA) - Answer: A geographic area (as designed by the U.S. Office of Management and Budget) that includes one or more countries or country equivalents that have at least one urban core area of at least 50,000 population, plus adjacent territory that has a high degree of social and economic integration Flag - Answer: A hotel's franchise affiliation. Also commonly referred to as a brand Index Formula - Answer: Performance of Subject (your) Hotel / Performance of competitive set Hotels
Supply Share (%) - Answer: Available rooms subject hotel / Available rooms comp set (including subject hotel) Demand Share (%) - Answer: Rooms sold subject hotel / Rooms sold by comp set (including subjects hotel) Revenue Share (%) - Answer: Rooms revenue generated by a subject hotel / Rooms revenue generated by a comp set (including subject hotel) SMERF - Answer: Acronym used to describe Social, Military, Educational, Religious, and Fraternal buyers of hotel rooms and services. Some hoteliers prefer to use the term Sports as oppose to Social when identifying their market mix The European term in use is often MICE (Meeting, Incentive, Conference, and Event) Marketing Mix - Answer: The relative proportion of revenue contributed by each of a hotel's most important guest types (e.g. transient, group, or contact guests) Ancillary Revenue - Answer: Nonrooms income. Examples include guest's food and beverage purchases, meeting room rental, AV-related income, parking, spa charges, and activity fees. Also known as nonrooms revenue Table Service - Answer: A restaurant style in which guests are served while seated in a dining area Product cost percentage (pricing method) - Answer: A pricing method that relies on product cost percentage targets when determining menu prices
Product Cost % - Answer: Cost of product sold / All product sales Item Food Cost % - Answer: Item food cost / Selling price Selling Price - Answer: Item food cost / Item food cost % or Product cost + Contribution margin desired Pricing Factor (foodservice) - Answer: A constant number used to help determine foodservice product menu prices $1.00 / Desired item food cost % Product Cost: plus (Pricing Method) - Answer: Any of a number of pricing methods that consider product cost as well as one or more additional costs when determining selling price Prime Cost - Answer: The sum of the product cost and labor cost required to produce a menu item Contribution Margin (CM) - Answer: Selling price - Product cost Sales Volume (foodservice) - Answer: The number of a single menu item sold during a defined accounting period Total Revenue - Answer: Selling price x Number (volume) sold Point of Sale (POS) System - Answer: A computer system used to record and retain sales data Deuce - Answer: Restaurant industry jargon for a table that seats two guests
Turn (table) - Answer: The number of times a table (or seat) is used during the same dining period. The formula is: Number of guests served / Number of available seats Ambiance - Answer: The feeling, character, or mood associated with a specific location Day Part - Answer: A subsection of the day, during which a specific menu type may be served. For example, the time period between 6am to 10am (breakfast) vs. 11am to 2pm (lunch). Used to target market and to precisely track sales levels Restaurant Row - Answer: Industry slang for a geographic area that contains multiple and competing foodservice operations Menu Mix - Answer: The total number of various food and beverage products (menu items) ordered by guests during a designated time period Check Average - Answer: The mean amount spent per visit by each restaurant guest during a designated time period (e.g. by day part (lunch or dinner) or calendar period (daily, weekly, or monthly). The formula is: Total revenue / Guest served Price blending (foodservice) - Answer: The process of pricing food and beverage products with different cost ratios in such a way as to optimize revenues in a least cost manner Revenue Center Contribution % - Answer: Revenue Center Sales / Total Revenue Day Part Contribution % - Answer: Day part sales / Total revenue
Offsite Catered Event - Answer: An occasion in which a foodservice operation provides food and beverage products, as well as any labor required to serve the products, at a location separate from its primary place of business Banquet Room - Answer: A uniquely designated space available for privately hosted on-site catered events For-Profit (foodservice) - Answer: A foodservice operation whose continued operation is dependent on its ability to generate income in excess of expenses. Also referred to as commercial foodservice operation. Examples include most restaurants, bars, nightclubs, and lounges Nonprofit (foodservice) - Answer: A foodservice operation whose continued operation is not solely dependent on its ability to generate income in excess of expenses. Also referred to as a noncommercial foodservice operation or a subsidized operation. Examples include those foodservice facilities operated in schools, colleges, hospitals, and extended-care facilities Accounting Period - Answer: A defined period of time (e.g. a year, month, week, day or hour) in which an RM wishes to report or analyze an operation's revenue generation Top-line Revenues - Answer: Foodservice jargon for an operation's total income. Used to differentiate the operation's gross revenue production from its bottom line or net income (profit) production Same-store Sales - Answer: Sales revenues achieved by operations that have been open for more than one year. Also referred to as same-store revenue, comparable (comp) sales, or like for like (LFL) sales.
This statistic allows RMs and others to determine which portion of increased revenue has come from real sales growth and which portion from the opening of new units or stores. The distinction is important because in most cases a saturation point, at which time future sales increases must be driven by same stores sales growth, will likely occur Revenue per square foot - Answer: An operation's total annual revenue divided by the number of square occupied by the operation. Also referred to as sales per square foot Occupational Costs - Answer: Expenses related to occupying and paying for the physical facility that houses a foodservice unit. Some examples of occupancy costs include rent, utilities, and facility insurance Other Expense (foodservice) - Answer: Those operating costs that are neither food nor labor costs Revenue per available seat hour (RevPASH) - Answer: Total Revenue / Available Seat hours Ownership of Responsibility - Answer: The individual or department with primary accountability for a defined task or mission Bottom Line - Answer: Industry slang for an organization's profits, or final outcomes USAR - Answer: Short for Uniform System of Accounts for Restaurants. The standardized accounting procedures for the restaurant industry, including those related to the presentation of operating results in the Statement of Income and Expense (Income Statement) Barriers to Entry - Answer: Obstacles in the path of a business seeking to gain entrance to a new market
Cyclical (business) - Answer: A business affected by identifiable but only marginally predictable fluctuations in economic activity Seasonal (business) - Answer: A business affected by an identifiable and very predictable fluctuation in economic activity Pipeline (hotel) - Answer: The lodging industry term used to describe those hotels that are in various phases of development but which have not yet opened Distressed Market - Answer: An economic condition that results in revenue levels that are significantly (10% or more) below historic norms Leveraging - Answer: The use of borrowed money to acquire business assets Displacement Analysis (revenue) - Answer: A structured examination of the relative merits of choosing among alternative pieces of business for the purpose of identifying the piece that optimizes revenue Turnover Rate (employee) - Answer: The number of employees who leave an organization each year, expressed as a percentage of the average number of workers employed by the organization. High turnover rates typically mean less experienced employees SWOT Analysis - Answer: Strengths, Weaknesses, Opportunities, and Threats analysis -- a systematic approach to assess an organization's current environment as part of the strategic planning process Distributable (expense) - Answer: A cost that can be reasonably assigned to one specific department with an operation. Also referred to as distributed expense. Examples in the lodging
industry include the cost of rooms-related labor, amenities, and cleaning supplies-- all expenses that are distributable to the property's rooms (housekeeping) department. Undistributable (expense) - Answer: A cost that cannot reasonably be assigned to only one specific department within an operation. Also referred to as an undistributed expense. Examples include rent, advertising, taxes, and insurance. Recession - Answer: A widespread and significant decline in economic activity and employment, typically lasting from six months to a year Value - Answer: Perceived Benefit - Price