Principles of Revenue Management in Travel and Tourism Industry

The Travel and Tourism
Business Toolkit

Table of Contents
Introduction.................................................................................................................................................2
LO1.............................................................................................................................................................3
P1 Rational And Principles Of Revenue Management Of Travel And Tourism Industry........................3
P2 Application Of Revenue Management Tools To Generate And Maximize The Profits......................3
LO2.............................................................................................................................................................4
P3 Stages Of HR Life Cycle And Importance In Retaining And Developing Talent..............................4
P4. Development Of Performance Management Plan, Techniques To Resolve Negative Behavior And
Retention Issues.......................................................................................................................................5
LO3.............................................................................................................................................................6
P5. Explore The Legislation Follows By Travel And Tourism Industry..................................................6
P6. Impact Of Company, Employment And Contract Law On Business Decision Making.....................6
LO4.............................................................................................................................................................7
P7. Different Types Of Financial Statements And Reporting Mechanism..............................................7
P8. Importance Of Budget And Identification Of Variance.....................................................................9
CONCLUSION.........................................................................................................................................10
REFERENCES..........................................................................................................................................11

Introduction
Travel is the activity in which movement of people is happening between two different
geographical locations in order to get entertainment or exposure or attain meetings etc. Travel
can be done through vehicles such as car, bus, train, boat, airplane, ship or by foot too. Travel
can be done without luggage or with luggage. Tourism refers to the activity in which people do
travel for the various purposes. It can be national or international. Travel and tourism is an
industry in which various travel agencies are working and operating its business successfully. It
comes under the head of service sector. It helps country to earn foreign currency and develop its
economic conditions. Topdeck is tour operator which was established in year 1973. Currently
Topdeck is operating in 65 countries (Boniface, Cooper and Cooper, 2016). Report will highlight
the principles of revenue management and use of tools in order to generate revenue. The report
will review the HR life cycle stages and its importance. The report will also explain about the
legislation that applies to travel and tourism industry and its impact on the business decision
making. Report will also explore the financial reporting and mechanism of the particular industry
and also explain the importance of budgets in business.
LO1
P1 Rational And Principles Of Revenue Management Of Travel And Tourism Industry
Revenue management is the application of analytics which help industry to predict about
the customer behavior, optimize the availability of services and price to maximize the revenue
growth. There are various principles of revenue management which can drive and generate
revenue in a particular situation in the industry (Board and Skrzypacz, 2016). These principles
are as follows –
PRICING – It refers to the process of determining the price of services provided by industry to
its customers in order to gain and generate revenues. The price determination is done on the basis
of various pricing strategies adopted by industry. Generic pricing strategies are most popular
strategies used in the industry.
ELASTICITY OF DEMAND – Revenue is directly linked to the demand of customers for the
services provided by travel and tourism services. Elasticity of demand refers to the measurement

of the quantity of demand of a service to change in price. If there is an increase in pricing lead to
increase in revenue for the industry, this means there is inelastic demand and vice versa if there
is decrease in price which lead to increase in revenue due to increase in demand for the services.
DEMAND FORECASTING – It refers to the process of estimating the expected demand from
the customers for the services in the future. It also impact the revenue of the industry. If there is
wrong forecasting of demand by the company, this would lead to decrease in revenue due to high
cost and vice versa. Thus, industry should use accurate measurement of forecasting techniques to
estimate the demand and accordingly prepare its strategies (Akan, Ata and Dana, 2015).
AVAILABILITY – Availability of inventory also impact the service of industry which in turn
impact the revenue generation. The company who have more depth and breadth of inventory at
the time of high demand rate of services, will earn more profits and generate more revenue rather
than those company in the industry who don’t have much inventory at the time of demand for the
services by the customers.
P2 Application Of Revenue Management Tools To Generate And Maximize The Profits
Hospitality industry is part of a large enterprise which is known as the travel and tourism
industry. It is one of the oldest industries in the world. Today the industry and their services have
changed and expanded in the eras. Revenue management is a technique for optimizing revenue
earned from a definite, perishable resource. The challenge is to sell the right customers to right
resources at the right time. Revenue management implements the basic principles of supply and
demand economics in a strategic way to generate incremental revenue.
There are three essential techniques to apply for revenue management:
• There is a certain amount of resources available for sale.
• The resources that have been sold are bad. This means that there is a time limit for
selling resources, after which they struggle for value.
• It is that different customers are willing to pay a different price for using the same
amount of resources (Pavlova, 2017).
Revenue management is particularly high relevance in those cases where the fixed cost is
relatively high compared to the variable cost. There are less variable costs, the more earned
revenue will contribute to overall profit. In other words, revenue management tries to maximize
revenues by managing a high occupation and lower room rate (customers of vacation) versus low
occupancy and high room rates among business (business clients).