Yield/Revenue Management 101

The goal of this presentation is to

understand the terms and processes
involved in Revenue and Yield
Management.
 Lesson Objectives
After completion of this lesson the learner will be able to :
□ Define the terms associated with revenue management
□ Explain the process of maximizing revenue and how revenue
management can help achieve this
□ Describe the role of the Global Distribution System in
Revenue management
□ Define ways to measure Revenue management success
Revenue/Yield Management

Integrated control of
CAPACITY and PRICE
 So what does that definition actually
mean?
□ Selling the right product
□ Correct brand, room type, and/or meeting space

□ To the right customer

□ Transient or Group/Business or Pleasure

□ At the right time

□ The booking window of how far out guests book

□ For the right price

□ Properly position rates for each segment
 Maximize Revenue
“Maximize Revenue” can be broken down into three main activities:

Maximize Revenue

Inventory
Pricing Strategy Management Selling Strategy
How do we price our How many rooms How do we sell our
product? are made available product?
at each price point?
 So, how does Revenue Management help to
accomplish the goal of maximizing revenues?

□ Price the product (rooms) appropriately based on seasonality

(changes in customer mix, demand, etc.)

□ Focus on forecasted demand for the rooms and develop restriction

and authorization strategies that will capture the highest possible
revenue from that demand.

□ Implement selling strategies that make sense to the customer,

support the brand’s selling philosophies, and maximize the
property’s revenue.
 Pricing Strategy
Pricing is the process of determining the rates that will
ultimately define the product in the marketplace. It is a
long-term strategic plan designed to target specific
customers and offer them the best possible price/value for
their money. The customers’ willingness to pay a certain
rate is directly related to the “perceived value” of the
room. When establishing a pricing structure, there are
three factors to consider.

□ The Customer
□ The Property
□ The Market
 Inventory Management
Translating the customer selection
process into restrictions
Stay controls are used to FILTER out EXCESS
DEMAND. The timing of your revenue management
decisions in conjunction with other factors such as
arrival/departure patterns, average length of stay, etc. will
dictate which control to use.

Minimum Stay Close to Arrival

Maximum Stay Close inventory/GTD

Allotments/Tally Block/Group Only

 Demand
The goal of Revenue Management is to capture the most
room revenue from existing demand, thus maximizing
revenue.
You may ask yourself, what is demand?
□ Demand: is defined as all of the people that want to stay at the
property (demand is not constrained/impacted by physical
capacity, restrictions, or availability of rooms.

□ Demand is calculated by: Rooms sold PLUS demand

turndowns. Demand turndowns are rooms that were turned
away due to restrictions or lack of available inventory.
 Filter or Wall?
Stay controls act like filters, holding back some transient
business while letting other business to pass through. Other
controls are like a wall – stopping transient business all
together. Identify if the following controls are filters or walls
□ Rate Controls
□ Closed to Arrival
□ Minimum Stay
□ Maximum Stay
□ Close All-Block-Zero out inventory
□ Allotments
□ Block Only-Group Only
□ Close 6pm/4pm
 GLOBAL DISTRIBUTION
SYSTEM

How do we maintain rate integrity and

restrictions when all those other booking
engines (Internet) are discount options for
our customers?
 The GDS Marketplace
□ GDS represents 19% of Lodging Room Revenue

□ GDS is the preferred booking vehicle of travel agencies

• 80% of all reservations made by agents for Marriott brands are booked via GDS

□ Marriott owns the highest market share in the GDS channel

at 20%

□ GDS is the 2nd largest source of reservations for Marriott

Lodging
 Are We Alone?
□ Travel Industry
□ Airline seats - once the □ Car Rental Agency
aircraft departs with □ Media Advertising
an empty seat, there is □ Hobbies - Golf, Horse Riding
no longer a revenue etc.
opportunity associated □ PRODUCE
with that seat.
 MEASUREMENT OF SUCCESS

□ Once the appropriate actions have been

effectively implemented, they must be
measured for their success. The
cornerstone of measurement for any
effective Revenue Management strategy is
to focus on RevPAR
 How do WE measure our Revenue
Management success?
□ Occupancy?
100
□ Avg. Daily Rate? 90
□ Accurate Forecasting? 80
70
□ Revenue? 60 Occup %
□ Exceeding budget? 50
ADR
40
□ Revenue per Available RevPAR
30
Room? 20
10
0
My Hotel
 RevPAR!
□ Occupancy is an incomplete measurement
because it fails to account for lost revenue due to
varying room rates.
□ ADR is an incomplete measurement because it
fails to account for lost revenue due to unsold
rooms.
□ RevPAR blends both occupancy and ADR
 Which hotel is best utilizing
Revenue Management
Techniques?
ADR OCC %
Hotel 1 $81.54 55%

Hotel 2 $74.75 65%

Hotel 3 $69.00 68%

 All the same!

ADR OCC % RevPAR

Hotel #1 $81.54 55% $44.85

Hotel #2 $74.75 65% $44.85

Hotel #3 $69.00 65% $44.85