Bina Nusantara 1 Subject Year V

Bina Nusantara 1

Subject Year : V 0206 – Administrasi & Operasional Kantor Depan : 2009 Revenue Management Week 5 Bina Nusantara 2

Subject • Occupancy percentage • Average daily rate • Rev. PARComponents and use of revenue management • Applications of revenue management Bina Nusantara 3

Objectives: On completion of this lesson, the students will be able to: - apply revenue management as a means of maximizing the room revenue to produce a profit Bina Nusantara 4

Occupancy Percentage • Occupancy percentage is a traditional view of measuring the effectiveness of the general manager, marketing staff and front office staff • For investors: to determine the potential gross income of a lodging establishment Bina Nusantara 5

Occupancy Percentage It is used to answer such questions: • How many rooms were sold? • How effective were reservation agents in meeting the room and amenity needs of the guests? • How competent were front office staff members in making the sale? Bina Nusantara 6

Review Definition of Occupancy Percentage • Occupancy Percentage - reveals the success of a hotel’s staff in attracting guests to a particular property Number of Rooms Sold x 100 Number of rooms available • Double Occupancy Percentage – measure of a hotel staff’s ability to attract more than one guest to a room; thus a higher room rate and additional income Number of Guests – Number of Rooms Sold x 100 Number of Rooms Sold Bina Nusantara 7

Definition of Average Daily Rate ADR • Average Daily Rate (ADR) - A measure of the hotel’s staff efforts in selling available room rates Total Room Sales Number of Rooms Sold Bina Nusantara 8

Definition of Rev. PAR • Rev. PAR – ability of a hotel to produce income many dollars each room is producing. and how Room Revenue Number of Available Rooms or Hotel occupancy % x ADR Bina Nusantara 9

Discussion Question Utility of Occupancy percentage, ADR, and Rev. PAR? Answers: • Used to project room revenues • Demonstrate how room revenue is calculated • Leads into Revenue Management Bina Nusantara 10

History of Yield Management • • • Bina Nusantara Airline industry’s use of yield Management – Deregulation of airlines in late 1970 s “Take It or Leave It” – Certain periods, certain seats, certain flights… Compare similarities of the airline industry and hotel industry • Volatile product • Demand periods which places the producers in a favorable position Indicate differences of the airline industry and hotel industry in using yield management • Hotel groups can spend large amounts of money on-site for food and beverage 11

Components of Revenue Management • Yield – the percentage of income that could be secured if 100% of available rooms are sold at their full rack rate (highest room rate posted for a room in a hotel) • Revenue Realized Number of Rooms Sold x Actual Rate • Revenue Potential Number of Rooms Available for Sale x Rack Rate • Yield = Revenue Realized (# Rooms Sold x ADR) Revenue Potential (# Rooms Available x Rack Rate) Bina Nusantara 12

Revenue Manager • Reports to general manager • Works closely with marketing and sales department • Consults with front office manager Bina Nusantara 13

Use of Yield Management To maximize profit for guest room sales Bina Nusantara To maximize profit for hotel services 14

YIELD FORMULA Yield = Revenue realized Revenue potential Bina Nusantara 15

Determining Yield • The Times Hotel has 300 rooms available for sale and sold 200 rooms at $85 with a rack rate of $110 • How many % is the Yield? • The Yield is 51, 51% 200 x $85 = $17, 000 x 100 = 51. 51% 300 x $110 = $33, 000 • The 51% yield means the staff’s effort in achieving maximum occupancy could have been improved by using effective strategies to sell more $110 rooms. Bina Nusantara 16

Determining Yield • Thus, the goal of yield management is to sell available rooms at the highest rate (rack rate) Bina Nusantara 17

Occupancy Percentage Comparison Hotel No. Rooms Available No. Rooms Sold Rate Income Occupancy % ABC 500 200 400 $80 $95 $16, 000 $19, 000 $35, 000 80% 100 300 400 $80 $95 $ 8, 000 $28, 500 $36, 500 80% XYZ Bina Nusantara 500 18

Yield Comparison Hotel Revenue Realized Revenue Potential Yield % ABC $35, 000 $47, 500 73. 68 XYZ $36, 500 $47, 500 76. 84 *500 rooms x $95 (rack rate) = $47, 500 Bina Nusantara 19

Which Hotel has Achieved the Highest Yield? • Both hotels have achieved an 80% occupancy, but hotel XYZ has achieved a higher yield while selling the same amount of rooms Bina Nusantara 20

Optimal Occupancy and Optimal Rate Optimal Occupancy Optimal Room Rate A room rate that Achieving 100% occupancy approaches the rack rate, With room sales, which will work together to Yield the highest room rate produce the yield Bina Nusantara 21

Optimal Occupancy & Optimal Rate • Situation 1: • A 300 -room hotel has sold: – 100 rooms at $76 – 150 rooms at $84 – 35 rooms at $95 (rack rate) • The yield = 83 Bina Nusantara • Situation 2: • A 300 -room hotel has sold: – 200 rooms at $90 – 85 rooms at $95 (rack rate) • The yield = 91% • Additional revenue = $2, 550 22

Yield Management Strategies Demand Strategy High Low Bina Nusantara Maximize rates, require minimum stays Maximize room sales, open all rate categories 23

Forecasting • Importance of daily accuracy in forecasting. • Accurate forecasting of transient demand will assist hoteliers in developing strategies to maximize sales to this group Bina Nusantara 24

Block-Out Periods • Block-out periods - Tagging certain dates in a time period when rooms have to be sold at a certain rate and/or certain number of minimum room rental nights Bina Nusantara 25

Automated Systems and Procedures • Discuss the importance of using computers and standard operating procedures when using yield management • Discuss the importance of training to use a yield management system Bina Nusantara 26

Channel Management • Reservation Channels – – – Bina Nusantara Central Reservations GDS Third-party reservation system Toll-free phone reservation Travel Agent 27

Management Challenges In Using Revenue Management • Alienation of Customers • Minimum stay requirements • Price gouging Bina Nusantara 28