Summary
A summary of Revenue management year 2.
- Course
- Institution
A summary of Revenue management year 2.
[Show more]
Seller
FollowAnnebelle222
Reviews received
Content preview
Summary Revenue Management (Operations Design)General information:
History of Revenue Management
A highly regulated market started to deregulate, starting in 1978 with airplanes.
It soon affected hotels. The internet highly influences revenue management.
Why is Revenue Management important?
Revenue Management is very important to hotels because it allows a hotel to
anticipate demand and optimize availability and pricing, in order to achieve the
best possible financial results.
Implementing Revenue Management
Revenue management: is about selling, the right product, to the right customer,
at the right price, at the right time, in the right place
The right product: Different willingness to pay, looking for different products.
The right customer: Relation between revenue between segmentation and the
customer.
The right price: Price elasticities
The right time: Inventory management per Chanel & Capacity. Process of
controlling the number of units and availability of products and services.
The right place: Managing your inventory across various distribution channels.
You need demand first and you need to control your reservations in a reservation
system. You also need to analyze and forecast. Remember PUP: Pricing, Unit
Availability, Purchasing Rules and Restrictions
Revenue Management Strategies:
Conditions for Effective Revenue Management:
-Perishable goods (a good you cannot store again, which is gone forever, e.g a
hotel room that has not been sold for one night)
-High fixed cost
-Low variable cost
-Limited and fixed capacity/inventory
-Time critical-large fluctuation in demand
-Highly segmented
, Price:
What is a right price and how does this increase revenue?
Optimal price: Depends on a lot of influencing factors. Sometimes it is best to
wait for the right moment to determine a price.
Price and demand relation:
Dynamic Pricing
Multiple prices lead to an increase of revenue: Set multiple prices for various
market segments. This is called dynamic pricing.
Open Pricing
Open Pricing is pricing in a social world; everyone knows what is going on.
Value Based Pricing vs Cost Based Pricing
Value Based Pricing Cost Based Pricing
Value Based Pricing creates a scenario Cost Based Pricing uses manufacturing or
where the organization needs to focus production costs as its basis for pricing.
upon the value placed by the customer on The cost based pricing company uses its
the product or service. Next, the costs to find a price floor and price ceiling
organization needs to equate that value to (the minimum and maximum price for a
a specific price. A price/value relationship specific product). These serve as the price
then develops in which the price must be range. Ideally, the price should be
equal to or less than the value placed somewhere between the floor and ceiling.
upon that product. How close or far the price is from either
depends on the market.
Customer Willingness to Pay
Customer Willingness to Pay is the maximum price which a customer will
definitely pay for a product. For example, a customer is usually more willing to
pay more for a drink in a luxury resort than in a local retail store.
Price Elasticity; the absolute value of percentage change in the quantity of a
good demand divided by percentage change in the price of that good.
The price elasticity is determined by four factors: 1) Is the service considered a
luxury or necessity. 2) The availability of substitutes. 3) Time factor, the longer
the period the more elastic the demand. 4) The price relative to a consumers
budget. Small household necessities are often price inelastic, whereas the price
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Annebelle222. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.95. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53068 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now