Hotel Management Revenue Analysis

Final Written Examination

• The final exam will take place in week 18.
• Study all course content from the beginning.
• The exam will be 75 minutes long.
• It will include short essay, computations, multiple choice, and true/false questions.
• The proportion of points for each question type will be provided before the exam.

Week #1: History of Yield Management

• Yield management started in the airline industry in the late 1970s.
• Deregulation and low-cost airline models emerged.
• Traditional airlines lost market share.
• Yield management has expanded to include the hotel industry, starting with companies like Marriott.
• Chief Revenue Officer positions are now common.

The 4 Conditions of Yield Management

• Fixed capacity environment (limited inventory)
• Perishable resource
• Varied but predictable demand
• High fixed costs and low variable costs

Yield vs. Revenue

• Yield Management (YM) is essentially a form of Revenue Management (RM)
• RM is a system of managing a company's revenues.

Week #2: Using Metrics

• Key Performance Indicators (KPIs) are used to evaluate business performance.
• KPIs are useful for comparing performance over time and against competitors.
• Occupancy Rate = (Number of rooms sold / Number of available rooms) * 100

Week #2: KPIs

• Occupancy Rate: percentage of rooms sold. Used to determine the level of sales.
• Average Daily Rate (ADR): revenue per room sold. Revenue/ number of rooms sold= ADR
• Revenue Per Available Room (RevPAR): revenue per available room. Rooms revenue/ number of available rooms = RevPAR
• Gross Operating Profit Per Available Room (GOPPAR): GOP / Number of available rooms
• Revenue per Available Seat Per Hour (RevPASH): revenue/ number of seats* number of hours.
• Total Revenue Per Customer: total revenue/ number of guests

Week #2: Other KPIs

• Food & Beverage Sales Per Guest: total food & beverage sales/ number of occupied seats
• Average Length Of Stay: number of occupied rooms/ number of bookings
• Customer Satisfaction Rate: Positive reviews/ total number of reviews
• Session Take-away: Using KPIs, data analysis, understanding business specifics.

Week #3: Hotels Classification & Market

• Hotel types, e.g., 5-star (luxury), 4-star (upscale), 3-star (mid-scale), 2-star (economy), 1-star (budget) are considered
• A market is a physical space where buyers and sellers meet (goods, services, or information)
• A market includes digital systems and global contexts
• Hotel market segments can include tourists, business travelers, and locals.

Week #3: Tools for Market Analysis

• SWOT analysis (strengths, weaknesses, opportunities, threats)
• PESTEL analysis. (Political, Economic, Social, Technological, Environmental, Legal).

Week #3: Competition

• Direct competitors offer the same quality of service.
• Location, pricing, star ranking, and features are key criteria to assess competition
• Example graph shows the average features for the price paid.

Week #4: Customer Segmentation

• Segmentation categorize customers for different revenue-driving strategies.
• Demographic: age, gender, income, marital status
• Psychographics: activities, personality, values
• Geographic: local, regional, national, international
• Behavioral: attitudes, benefits, usage rates, patterns
• Example segmentations: Leisure individual, Leisure Group, Business Individual, Business Group

Week #5: Supply and Demand

• Supply refers to the quantity of a commodity/service a provider wishes to sell at differing prices
• Demand refers to the quantity that consumers wish to buy.
• Consequences of an increase in supply: lower rates, price pressure, higher costs to market, loss in margins, impact on customer experience
• Consequences of a decrease in supply: higher rates, pricing power, less competitive pressure, improved profit margins, possible improved customer experience
• Consequences of an increase in demand: Higher room rates, increased revenue, increased staff and resources, reduced availability, greater revenue from ancillary services
• Consequences of a decrease in demand: Lower room rates, lower occupancy, revenue decline, cost-cutting, greater competition and promotional pricing

Week #6: Pricing Theory

• Market price: current price at which a service is bought or sold, determined by supply and demand.
• Demand elasticity: refers to the degree to which demand changes in response to price changes
• Inelastic of Demand: Demand for a good or service is static when its price changes
• Veblen Goods: price increases as status or rarity increases.
• Different pricing strategies

Week #7: Pricing and Revenue Management

• Pricing depends on number of rooms sold, occupancy rates, and room rates
• Market price is determined by supply and demand.
• Pricing theory: concepts like supply and demand, elasticity of demand, and Veblen goods

Week #8: The Demand Calendar

• The demand calendar is a helpful tool for predicting business patterns.

Week #9: Online Travel Agencies (OTAs)

• OTAs are online companies that allow customers to book travel services such as flights, hotels, and cars
• OTAs have a large market share in selling travel services.
• Consequences of OTA dominance: reduced control & ability by a hotel to sell

Week #10: Broad vs Narrow Rate Parity

• Broad Rate Parity: hotels must operate at the same rate, both online and offline.
• Narrow Rate Parity: hotel sells rooms at the same rate but sells lower rates to other channels such as phone, emails, or travel agents.

Week #11: Case Study

• A case study example of a hotel with a specific occupancy rate is provided.

Week #12: Displacement Analysis

• Displacement analysis evaluates the financial benefit of a group booking compared to the revenue it could generate by selling individual rooms for the same block of time
• This process uses net room revenue differentials, net F&B revenue differentials, and other revenue differentials to determine if an individual booking or a group booking is the better option.

Week #13: Distribution vs. Reservation channels

• Distribution channels are a sequence of business intermediaries which facilitate the distribution of a good (service, information), till it reaches the end user
• Direct distribution channels: Manufacturer to Consumer (e.g, online ordering)
• Indirect distribution channels: Manufacturer to Intermediary to Consumer (e.g., distributors, retailers, or global retailers)
• Different distribution channels lead to rate diversity.

Week #14: Rate Parity

• Rate Parity agreement ensures the same rate and terms for the same room type regardless of booking channel.
• Broad Rate Parity: same rates on all sales channels. Narrow Rate Parity: same rates online only.

Week #16: Revenue Management in the Restaurant Industry

• Perishable products, fixed capacity, varied demand, high fixed costs

Week #16: Restaurant Capacity Management

• Capacity utilized in a restaurant

Week #4 - 16 Summary

Note: various case studies are used to analyze and calculate revenue scenarios in these weeks.

This quiz explores key concepts in hotel revenue management, including occupancy rates, Average Daily Rate (ADR), and revenue per available room (REVPAR). Test your knowledge on factors affecting revenue and room types by matching them with their performance metrics. Ideal for students in hospitality management or industry professionals seeking to sharpen their skills.