Revenue Management

Revenue
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TAKS 1............................................................................................................................................1
1.1 Discuss the concept and main principles of revenue management in a hotel sector........1
1.2 State the skills, roles and responsibilities of a revenue manager in a hotel......................2
1.3 Review various front office Key Performance Indicators and systems to analyse the use of
effective revenue management...............................................................................................2
TASK 2............................................................................................................................................3
2.1 Describe various factors which need to be taken into account when setting bedroom
tariffs.......................................................................................................................................3
2.2 Evaluate various pricing approaches and tactics appropriate to different types of hotels.4
2.3 Discuss what revenue managers must analyse for successful forecasting and budget setting
for the next year......................................................................................................................5
2.4 List various sales and reservation techniques to maximise (rooms) revenue in the hotel.5
TASK 3............................................................................................................................................6
3.1 Discuss the history and meaning of yield management...................................................6
3.2 Illustrate the steps to implement the practice of yield management................................7
3.3 State the issues a revenue manager faces when implementing yield management..........8
3.4 Describe what a hotel needs to consider when setting an overbooking policy................8
CONCLUSION................................................................................................................................9
REFRENCES.................................................................................................................................10

INTRODUCTION
Revenue management is considered as application of controlled analytics which predict
consumer behaviour in the marketplace that is of micro level and it will also optimize the
availability of products as well price in order to maximize revenue. In respect of hospitality
industry revenue management is consider as selling of property's perishable inventory at the right
time to the right guest (Afèche, 2013). Organization selected for this report is Premier Inn which
is a private limited company operating at hospitality industry. It is founded by Whitbread in year
1987 and its head office is located at Dunstable, United Kingdom. The main aim of developing
this report is analyse the concept and basic principles of revenue management at hotels and
creating understanding of several factors that need to be consider while making pricing strategy
for hotel bedrooms and room revenue budget. It will also include understanding of methods
which can be implement for practising yield management at hotels.
TAKS 1
1.1 Discuss the concept and main principles of revenue management in a hotel sector.
Hotel revenue management is consider as selling of right room to the appropriate client at
the right moment along with at the right price. This will also include selling of rooms through the
right distribution channel with effective commission ratio. It will also include measurement of
customers through different segments and identify they are willing to pay or not in order to fulfil
supply as well as demand of hotels rooms. The main objectives of applying revenue management
at hotel are conducting better management of resources and protecting turnover of staffs at the
slow period. This also help in ensuring that appropriate numbers of employees are working at the
busiest times. In addition to this principles which are included in revenue management are
Market segmentation, booking patterns & Historical demand, demand forecast & displacement
analysis, overbooking, information system and pricing & inventory management (Principles and
Elements of Effective Hotel Revenue Management, 2019). At hotel industry, revenue
management can be adopted for many ways for example forecasting demand for fixing price.
Such as by adopting revenue management Premier Inn can forecast demand of room and then
accordingly they can fix the price as well as it will also help them in planning for advertising
activities according to booking.
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1.2 State the skills, roles and responsibilities of a revenue manager in a hotel.
There are several types of skills, roles and responsibilities which are performed by a
revenue manager at a hotel which help hotel in attaining goal as well as target in effective
manner. Below some of the major skills, roles and responsibilities of Premier Inn's revenue
manager are given below:-
Skills required for a revenue manager and its need: Relationship management: It is essential for revenue manager to have relationship
management skills so that they can develop as well as maintain proper relationship with
both internal as well as external stakeholders (Akan, Ata and Dana, 2015). Creative thinking: It is essential for revenue manager to have creative thinking skill
because through it they can develop creative solution for any problem which arise at
hotel.
 Leadership skills: This skill is essential because that will help revenue manager to guide
their team members so that they can attain their desire goal as well as target.
Role and responsibilities of the revenue manager: Create Pricing Strategies: It is main role and responsibility of revenue manager that they
set price of rooms and services according to the rooms.
 Track Hotel Revenue: Revenue manager also conduct calculation of hotel's revenue after
its expenditures. They also finally report to the general manager of hotel in order to gain
suggestion and revenue.
1.3 Review various front office Key Performance Indicators and systems to analyse the use of
effective revenue management.
Key performance indicator is method which can be used to measure performance at the
workplace. For a company key performance indicator play a essential role because it leads to
various benefits such as help in goal setting, conduct effective management, guide in
development of plans, conduct rewards and so on (Bayoumi and et. al., 2013). There are numbers
of front office key performance indicators as well as system which can be adopted by a company
in order to evaluate the use of effectiveness of revenue management. From which some major are
given below:- Online rating: In today's time online rating is mostly used key performance indicators. In
this hotel will review their potential customers rating on different online websites or
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applications. It will also help in developing relationship among the customers as well as
hotels. Customers satisfaction: In this key performance indicators hotel management will take
review from customers in order to analyse customers satisfaction ratio (Besbes and Zeevi,
2012). Through this they can also get true and reliable feedbacks as well as suggestions.
 Occupancy percentage: According to this tool of key performance indicators hotel
revenue manager will evaluate and compare occupancy percentage of room at hotel in
past and current year.
TASK 2
2.1 Describe various factors which need to be taken into account when setting bedroom tariffs.
Hotel tariff plans is consider as rate menu which are developed by a hotel for their guests
or clients. It is essential for hotels to develop tariffs because it will help hotel's staffs in offering
services according to their client requirement and budget. Similarly it will also help clients to
select their services as well as rooms according to their budget and requirement. There are
several factors on which bedroom tariffs of Premier Inn hotel is depend, from which some are
given below:- Location: The rate of rooms is highly depend on the location of hotel such as if a hotel is
at the prime location like airport, visitors place, posh area and so on then the rate will be
high. However, if the hotel is located at normal area then the price of rooms will be
normal or low. Season: It is also one of the main factor on which rate of hotel is based. According to this
if there is season at which visitors ratio is high then the cost of rooms also get expensive
automatically.
 Competitors prices: If the competitive hotel set low price of their rooms then it is
essential for respective hotel to low down their price too, so that they can sustain in
marketplace effectively (Board and Skrzypacz, 2016).
2.2 Evaluate various pricing approaches and tactics appropriate to different types of hotels.
For a hotels it is essential to set their price in effective manner because through it they
can attract customers and encourage them to stay at their hotel. There are various types of pricing
approaches which a hotel can adopt in order to set their price such as pricing based on
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forecasting, rate parity strategy, price per segment, discount codes, offer packages and many
more. These pricing approaches are depend upon various factors, from which some are given
below which are considered by Premier Inn:-
 Purpose: The purpose of guest is also impact on the guest or client. Such as if a person
book a room to conduct formal meeting then they required various other services like
high speed internet connectivity, television, charging point and so on (Bodea and
Ferguson, 2014). Then in this case hotel need to ensure proper facilities so there is high
chance that they charge high.
 Types of hotel room: In a hotel there are different types of rooms such as single, double,
triple, quad, queen, king, twin and so on. So the charges are also based on type of room
which is selected by guest. Such as price of single is lower than others.
Pricing Approach:
There are several types of pricing approach which a hotel may adopt while setting their
price of their services and facilities. From which some are mentioned below:- Value based pricing: It refers to that pricing method which is adopted by hotel when they
offer ant specific additional value to customers. It will help them in generating high
revenue then competitors.
 Customers driven pricing: This pricing approach is based on demand driven, when their
will be change in demand then price will also change. Such as if at hotel demand get
increase then price will also increase.
Tactics approach to different types of hotel:
The types of hotel are based on specific specification, which are mentioned below along
with tactics approach for that:- Target market: Tactics followed by this types of hotel are providing high quality bed,
breakfast or food, establishment of hotel at proper location and many more. Levels of services: Tactics for this hotel types are providing services according to their
budget and level such as for world class they provide premium room, bed, jacuzzi etc
(Types of Hotesl/ Classification of Hotels, 2020).
 Ownership and affiliation: This will include independent hotel, single owned hotel and
chain hotel and for these tactics will be arranging funds according to their requirement.
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2.3 Discuss what revenue managers must analyse for successful forecasting and budget setting
for the next year.
Revenue management is consider as application of controlled analytics which help in
predicting consumer behaviour in the micro level marketplace as well as it will also optimize
availability of products and services for maximizing price (Hillman, 2012). On the other hand,
forecast is defined as a procedure which is used for making predictions which is future will be
based on past as well as present data. It is one of the mostly used analysis of trends. Forecasting
process is generally divided into three types i.e. qualitative techniques, projection and time series
analysis.
Importance of forecast
 It helps Premier Inn in conducting production planning through which hotel can offer
quality as well as appropriate products and services to their potential guests.
 Through this respective company can also forecast their sales, conduct inventory control
as well as it will also help in conducting control over business operations and functions
(Ivanov, 2014).
Points consider for accurate forecasting:
There are numbers of points which are essential to be consider by Premier Inn in order to
conduct accurate forecasting, from which some are given below:
 Management need to consider past economic performance of their hotel.
 They also need to evaluate current global condition as well as industry condition.
 Respective hotel also need to evaluate their rate of interest which they may earn through
business operations.
2.4 List various sales and reservation techniques to maximise (rooms) revenue in the hotel.
In hotel industry it is essential for hotels to provide different and attractive techniques in
order to maximising their revenue because through updated as well as innovative technologies or
services customers get attracted and also get encourage to stay at particular hotel even at high
price (Krishnamoorthy, Labuda and Haddock, 2012). Use of high and advance technology also
help hotels in enhancing their goodwill at the marketplace as well as industry. There are various
technology that can be adopted by Premier Inn in order maximise their their business are given
below:-
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 Direct booking: If a hotel offer direct booking options then it will be high chance that
able to attract more customers because it help them in saving their time. Destination marketing: It is most used technique by hotel, in this hotel conduct their
advertisement by highlighting destination so that more and more customers get attracted
toward it. Revenue management sales: According to this respective hotel will use technique related
to revenue management sales in which they provide additional discounts to their
customers so that they purchase their services (Legohérel, Fyall and Poutier, 2013).
 Impact of technology: This is the major factor which attract customers while conducting
booking at hotel. Such as Eccleston Square Pimlico hotel of London, United Kingdom
who use advance technology for controlling light and music.
TASK 3
3.1 Discuss the history and meaning of yield management
Yield management is developed in late 1990 by Archstone Smith Pioneering. At first
time it is developed for the airlines industry. There are main three consideration of using Yield
Management, first is their will be fixed amount of resources available for sales; second is
resource must be sold are perishable and last is their must be different customers who are willing
to pay different price in order to use similar amount of resources. Yield management is
considered as variable pricing strategy which is based on the understanding, influencing and
anticipating behaviour of customers in order to enhance revenue or profit a time limited
resources. Airlines industry are consider as initial sector who used concept of yield management
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Illustration 1: Eccleston Square Pimlico hotel of London
(Source: What do guests say about the 10 most high-tech
hotels in the world?, 2019)

(Meissner, Strauss and Talluri, 2013). This concept is generally used in those industry who are
dealing in perishable products such as restaurant, hotels, bus rental, cruises, railways and so on.
Yield management system is also known as revenue management system which is used by
management in order yo analyse, forecast and react to demand of customers in order to enhance
revenue of company. In hospitality industry revenue management can be used for various
purpose such as it helps in lowering cost, attracting new customers or guests, enhance brand
awareness and many more. Along with this yield management is also aid hotels in developing
strategic strategies that will be based on evaluating past and forecasting future.
3.2 Illustrate the steps to implement the practice of yield management.
In hotel industry, yield management is essential because through it they able to conduct
their work in effective manner as well as it will also help in selling right services to right
customers and at the right time (Rusmevichientong and Topaloglu, 2012). There are various
reasons and purpose which encourage management for adopting yield management such as
future planning by evaluating past, understand customers requirement and many more. There are
several steps which can be adopted by Premier Inn in order to implement revenue management
or yield management at their workplace, which are mentioned below:-
 Step 1: Set strategy: First stage is analysing situation then develop decision or strategy
accordingly.
 Step 2: Evolve methodology: After development of strategy, implementation of strategy
will be done for a particular period of time then assessment will be conducted.
 Step 3: Analysis and evaluation: After all these steps feedback will be taken from staffs
or clients or employees, in order to know effectiveness of strategies.
3.3 State the issues a revenue manager faces when implementing yield management.
In a hotel revenue management plays an essential role in implementing yield
management because they can environment analysis as well as they also develop strategies
accordingly so that implementation of strategies will be done appropriately (Krishnamoorthy,
Labuda and Haddock, 2012). While this Premier Inn go through several issues which are
mentioned below:- Expensive skill set: This issues is related to cost of training programs which are provided
to employees when a hotel adopt new as well as advance technology.
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 Technology not unto par: Respective issues is related to implementation of new
technology at the workplace, in this technology which hotel want to adopt is not
appropriate for hotel. Miscommunication: At hotel it is one of the most common issues because in hospitality
industry employees are from diverse location due to which miscommunication arise.
 Price factor: It is also major factor which impact on the business growth of hotel. Due to
this it is essential for revenue manager to adopt proper pricing strategies which will be
based on their service quality and guest budget.
3.4 Describe what a hotel needs to consider when setting an overbooking policy
Overbooking is also known as overselling in which sales of products and services is done
in excess i.e. actually more then supply. It is one of the most common practice which is done at
travel as well as hospitality sectors (Legohérel, Fyall and Poutier, 2013). Main reason behind
occurrence of this is, in respective sector it is expected that some peoples will cancel the plan due
to which extra booking are done. It is essential for Primer INN hotel to develop their strategies in
effective manner so that they can deal with overbooking. In this they can continuously update
rate over all OTAs, track distribution channels, always report their business at fingertips and
many more. It is also essential for respective hotel to always be prepare for overbooking in this
case they must arrange extra rooms in near by location where they can shift extra guests. They
must also evaluate their booking on the continuous or daily basis so that they can develop
strategies accordingly.
Factors need to considered by hotel while setting an overbooking policy:
There are several factors which are necessary to be considered by hotel in order to set
strategy for an overbooking policy, from which some are given below:-
 Hotel need to conduct historical data analysis in order to determine average wash.
 Understand business mix in order to understand which guests will likely to no show or
cancel booking.
 They also need to understand cancellation policy while developing strategies.
CONCLUSION
By evaluating above discussed points it can be summarise that in revenue management is
effective for each and every industry specially for hospitality sectors because through it they able
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to conduct proper planning which help in attainment of desire goal as well as objectives. For
revenue management it is essential for hotels to consider several aspects or principles of revenue
management because it leads to numbers of benefits. Along with this there are several key
performance indicators which are used by a hotel in order to evaluate their performance as well
as they also need to consider several pricing approaches which a hotel management can adopt in
order to enhance attract customers towards their services and offerings. In addition to this hotel
also need to conduct yield management because it will help them in conducting their work
effectively by selling right products to right customers.
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REFRENCES
Books and Journals
Afèche, P., 2013. Incentive-compatible revenue management in queueing systems: optimal
strategic delay. Manufacturing & Service Operations Management. 15(3). pp.423-443.
Akan, M., Ata, B. and Dana Jr, J.D., 2015. Revenue management by sequential
screening. Journal of Economic Theory. 159. pp.728-774.
Bayoumi, A. E. M. and et. al., 2013. Dynamic pricing for hotel revenue management using price
multipliers. Journal of Revenue and Pricing Management. 12(3). pp.271-285.
Besbes, O. and Zeevi, A., 2012. Blind network revenue management. Operations
research. 60(6). pp.1537-1550.
Board, S. and Skrzypacz, A., 2016. Revenue management with forward-looking buyers. Journal
of Political Economy. 124(4). pp.1046-1087.
Bodea, T. and Ferguson, M., 2014. Segmentation, revenue management and pricing analytics.
Routledge.
Hillman, N.W., 2012. Tuition discounting for revenue management. Research in Higher
Education. 53(3). pp.263-281.
Ivanov, S., 2014. Hotel revenue management: From theory to practice. Zangador.
Krishnamoorthy, J., Labuda, D.S. and Haddock, J.R., Oracle International Corp, 2012. Revenue
management systems and methods. U.S. Patent 8,223,935.
Legohérel, P., Fyall, A. and Poutier, E. eds., 2013. Revenue management for hospitality and
tourism. Woodeaton: Goodfellow Publishers.
Meissner, J., Strauss, A. and Talluri, K., 2013. An enhanced concave program relaxation for
choice network revenue management. Production and Operations Management. 22(1).
pp.71-87.
Rusmevichientong, P. and Topaloglu, H., 2012. Robust assortment optimization in revenue
management under the multinomial logit choice model. Operations Research. 60(4).
pp.865-882.
Online
Principles and Elements of Effective Hotel Revenue Management. 2019. [Online]. Available
through:<https://www.xotels.com/en/revenue-management/revenue-management-book/
revenue-management-ingredients>.
What do guests say about the 10 most high-tech hotels in the world?. 2019. [Online]. Available
through:<https://www.siteminder.com/r/trends-advice/hotel-travel-industry-trends/10-
worlds-high-tech-future-hotels/>.
Types of Hotesl/ Classification of Hotels. 2020. [Online]. Available
through:<https://setupmyhotel.com/train-my-hotel-staff/front-office-training/76-
classification-of-hotels.html>.
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