LU 1: Introduction LU 3: Equations, averages & variances, market share, STR reports Market competitors + ourselves CompSet ONLY competitors for benchmarking
Revenue Management Systematic Business Decision Process Analytical skills help to:Performance Measurements:
Designed to maximise revenue by selling: - see the big picture- comparison with previous performance Important Indices (also refer to numbers in answers!!)
- the right product (rooms) - support your argument- business reports- forecasts
- the right customer4 main functions of RM - exercise “sound judgment”- comparison with competitors MPI = (occ% my hotel ÷ occ% comp set)*100ARI = (ADR my hotel ÷ ADR com set)*100
- the right time & duration1. revenue analysis 3. inventory management - make “objective” decisions- alert about changes via revenue management RGI = (RevPAR my hotel ÷ RevPAR comp set)*100 OR RGI = (MPI * ARI) ÷ 100
- through the right channels2. business evaluation/pricing. 4. revenue strategy
Why do an analysis: Market share
5 Characteristics of RMHow to increase capacity: - To formulate effective alternative solutions 1. room supply share (fair share) = hotel available rooms ÷ total market available rooms
1. fixed capacity1. introducing sofa beds - Decide which solution to adopt based on the consequences of each possible solution 2. room demand share (volume/market share) rooms sold by hotel ÷ rooms sold in total market
2. time variable demand2. convert halls to bedrooms 3. room revenue share (value share) hotel room revenue ÷ total market room revenue
- the hotel’s demand fluctuate based on the seasons and the events Weighted average is used when the data of which the average/mean is calculate have a different
3. perishable inventory contribution (weight) to the average/mean value to be calculated If:
- if a room remains empty for a night, revenue is lostIndustries where RM can be applied Ratio the result of a comparison between the measurement of any 2 objects people, performances, etc. - fair share < demand = occ higher than comp. Total market = including own hotel
4. high FC/low VC- hospitality- golf the ratio shows a relationship between the 2 measures room demand share < value share = ADR higher than comp. Market = my property + comps.
- FC = 75%; VC = 15%; Profit = 10%- car rental- entertainment Index the result of a comparison to a fixed measurement (benchmarking) - room revenue share > fair share = RevPAR is higher than comp. Market share = my performance ÷
Tip:
5. advance reservations- transportation - aquatic parks Note: an index is never a % x% of y = z market performances OR
- advance information about buying below 100 = underperforming Why is the STR report important? me ÷ (me + competitors)
z = x%(y)
intentions & behaviour above 100 = overperforming - lends perspective to good/bad performance - allows to keep an eye on competitors and the market
Absolute variance the difference between 2 values (subtraction) - aids pricing decisions, help improve profitability - allows to monitor the effect of business strategies
50% of 6 = z
Relative variance the % chance between 2 values - view demand, supply, and revenue changes in the market - benchmarks performance
z = 0,5(6) = 3
LU 2: Market Segmentation Indicators: Hotel date and time definitions
RevPAR is used for: 1. week Sunday through Saturday2. comparable day same day, same week last year
Market set of actual & potential buyers who share a need/want that can be satisfied through - setting goals
GOPPAR gross operating profit per available room 3. weekday Sunday through Thursday4. weekend Friday and Saturday
exchange relationships - measurement management
Mass Marketing attempt to appeal to an entire market with 1 basic marketing strategy performance Note:
Income Statements STR competitive sets2. hotels can have more than one comp set
Segment Marketing focusing on a specific market segment to tailor existing products & services to - comparing performance to day-to-
1. which hotels directly compete?- local and broader geographic area
meet particular needs the competitive set day NOT
- similar hotels- groups vs transients date-to-
Business Mix the overall mix of guest types that make up the clientele staying at the hotel - measuring hotel room sales
Concept of comparison can be done through: - in close proximity- chain may have high one set, management may set another date
Segment a type of guest that is identifiable in their current customer base progress
- product (apples vs apples not apples vs pears) - numbers can in/exclude hotels
- scale (look at the big picture, not just one number - projecting future room
Options when a company wants to open a hotel:Why owners use HMA? revenue + cash flows 3. who is included in the comp set?
1. Hotel Management Agreement (HMA)- they operate on behalf of owner
IMPORTANT: the % in income statements always - recently more people feel that including subject data distorts the set
2. Hotel Franchise Agreement (HFA)- provide brand image, SOP’s, etc.
refers to the revenue!! - STR allows companies to choose to in/exclude data
3. Marketing Hotel’s Company Agreement- distribution systems/technologies
4. Independent Hotels- guarantee a certain performance
Averages STR comp set guidelines
1. mean average: total revenue ÷ # units sold 1. sufficiency2. changes
Hotel operators work with either 1 or 2Independent Hotels
= average units sold - min. 4 participating properties (excl. subject)- competitive set change must include a min. 2
- rarely own hotels they operate- only dependent for themselves
- min. 2 companies not affiliated with subjectconsistently reporting properties
- more freedom, more risk
Why use hotel operators for HFA? 2. weighted average: weight is expressed in numbers
if weight is in % (0,5 or 50%), bottom part of formula 3. composition
- owner is operating hotel themselvesMarketing Hotel Companies
not needed - no single property can be more than 50% of total room supply- no single company can be more
- provide distribution systems- don’t operate hotels, called a ‘network’
[(W1*Y1) +(W2*Y2) +...+(Wn*Yn)] ÷ (W1+W2+..+Wn) - no single brand can be more than 50% of total room supplythan 70% of total room supply
- much cheaper for hotel owner- brand image/marketing power weaker
- franchise fees are fixed and- standard requirement usually lower than HFA W - weight of the variable of which mean is calculated
Y – variables of which the weights average is calcul. STR profitability reports
indexed on revenues
provide benchmarking insights
A…D = field of valueN = # of values - revenue of other depts. than rooms- profitability per dept. and at GOP/EBITDA level
First moving average = fixed average = - cost for operated & undistributed operating depts.- data per avail. room/room sold (as % of TR)
*: opaque = when booking a hotel, you don’t know yet which ones, only some info (e.g., classifications)
**: OTA’s commission is usually around 15%-20%, bigger brands usually pay lessSegments are based
commissions = (A+…D)÷N
Second, third … limitations
***: special corporate codes = LRA (last room available) and NLRA (non-last roomon:available)
Moving average = [(A+…D) – (A+E)] ÷ N - data only available per year - fewer hotels provide P&L to STR than STAR report data
****: SMERFE sports, military, education, religion, fraternity, ethnic - price sensitivity
- profitability reports available 4-5 months after end of reported year
AD Purchased rate discounted rate connected to BAR - travel purpose
- rate paid
Reading the STR report:- running 3/12 months: most recent months- ranking is total – 1 (yourself)
Segments: Transient/Rate Codes - guest status
- % change ALWAYS from same month 1 year before- YtoD calculating avg of included months
- booking behaviour
Group statusesGroup characteristics
STR Bandwidth report
1. Definite status (DEF) = confirmed, signed, prepayment done- MICE = meetings, incentives,
- provides insights from monthly STR as it shows where the hotel is placed amongst range of comp. set
2. Tentative (TENT) = verbal confirmation, no contract, 95% confirmconvention, events
- data is computed once per month (opt-in)
3. Prospective (PRO) = request made, quotation sent, no booking- # rooms sold (min. 10 per night)
4. Cancelled (CAN) = after DEF or TENT, organiser cancels- requires more logistics (costs up)
5. Turn down (TD) = hotel rejects request- sudden high/low occupancies
6. Lost (LOS) = after PRO, organiser is not going ahead- meeting rooms + F&B revenue
LU 4: (Demand) forecasting/ forecast errors
Contract characteristics (e.g., airline crews, permanent stays, day uses
- stable, yearly income- set start + end date- disadvantage: lower rates during high season Budget an annual budget lays out a company’s projected income and expenses for a 12-month
- lower rates~ guaranteed # rooms within set time- business must always pay hotel period, to keep track of financial activity. They represent targets/goals for a given year:
Forecast refers to the tools/techniques used- usually set once a year
to predict development.- basis for rewarding management (bonus)
the purpose of forecasting is to have an updated vision of
how the business is evolving and use it for better strategies (updated regularly during the year)
Types of forecastingFactors influencing a forecast:
GDPR General Data Protection Regulation (e.g., CC numbers)
Collecting data’sSTLY same time, last year
- combination of historical and future data
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