Revenue Management: Maximizing Profitability through Optimization

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REVENUE
MANAGEMENT

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Contents
Introduction:...............................................................................................................................3
Revenue Manager Report:..........................................................................................................5
Findings:.....................................................................................................................................7
Discussion:.................................................................................................................................8
Conclusion:................................................................................................................................8
Recommendation and implementation:......................................................................................8
References..............................................................................................................................9

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Introduction:
All of the industries are more competitive more than the others. There are many of the
industries that have some high fixed costs which are necessary to cover the expenses,
irrespective of how lean the companies when compared with the other companies in the same
industry. The concept of revenue management employs the optimisation concept wherein the
mythology helps these companies in certain types of the industries which exploit the
characteristics to drive an additional amount of revenue with the aim of achieving a higher
amount of profitability.
The process of revenue management is the practise of maximisation of revenues of the
company while selling the same amount of the products or rendering the same amount of the
services. This is also known as the yield management, both of which are considered to an art
and a science. This technique employs the mix of the pricing strategies and the systems that
maximises the yield. These industries have products that expire and also the services that
expire. The examples could include the hotel rooms, banquet halls and also the meeting
rooms in the hotel industry and also the airline seats that utilises this technique in the utmost
efficient manner.
The attributes of this technique include the fact that the perishable inventory and the fixed
capacity are combined and are used as the revenue management. In order to illustrate, a hotel
has a certain set of the hotel rooms that are available and then there are some of the fixed
costs that markets in the customers that discriminate on the price with an approach which is
useful.
This approach is also useful for the companies that have a fixed amount of costs but have a
lower amount of variable cost also find this approach very useful. With the help of the price
discrimination, there are some of the customers that seek a lower amount of price and a

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minimum number of services and they are ready to pay in a higher amount for the services
that are being rendered or for their convenience level. For example, the car rental industry,
the tour industry all of these have these attributes.
The management of revenue leads to an innovation. This is so because this technique leads to
the creation of new products or services and also their prices. This is the technique of
innovation which leads to an increase in the amount of revenue from the source companies
that were not explored earlier. As per the article in the Hospitality Upgrade, the revenue
management accounts to 3 to 6% of the total amount of the revenue, there are also some of
the hotels that experience a higher impact on the same.
The focus of revenue management is a method which focuses on each one of the group or the
department within the company which actions that need to improve the profitability. The
company which successfully is able to make this technique a part of its daily operations
would surely reap its benefits by earning a higher amount of margin and achieving a higher
amount of profitability. There are some of the computer information systems that could help
these companies in implementing the process of revenue management and the procedures but
then these are the tools that assist and drive the technique of revenue management.
For the purpose of reaping the full benefits of the revenue management, any company must
be able to measure some of the variables. These are the metrics that differ from one industry
to another. But the bottom line is the fact that it should be able to indicate how well each
company is able to use its revenue management that affects the profitability of each company.
The culture of measuring, comparing and making the adjustments covers many of the aspects
of the business. This makes the company in total an efficient company which drives down the
costs and also increases the profitability of the company (Small business chron, 2018).