Principle of Revenue Management for Hospitality Industry

This report focuses on the principle of revenue management in the hospitality industry, specifically in the context of British Airways. It discusses the concept of revenue management, yield management, and the rational and principles behind it. It also explores the tools and strategies used for revenue management. Additionally, the report covers the management of human resources in the context of HR strategy, including the stages of the HR life cycle and performance management plan for the role of a travel agent. Overall, it provides insights into how revenue management and HR management contribute to the success of the travel and tourism business.

Travel and Tourism Business
Toolkit

Contents
Introduction......................................................................................................................................2
PART 1............................................................................................................................................2
Principle of the revenue management for hospitality industry...............................................2
PART 2............................................................................................................................................5
To manage human resources in the context of HR strategy...................................................5
PART 3............................................................................................................................................7
Legal and ethical consideration and its impact on business...................................................7
PART 4............................................................................................................................................8
To manage budgets and maintaining of financial and statistical records...............................8
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

Introduction
The term tourism can be defined as a subset of various activities and services that are offer and
provided by the hospitality industry. It undertakes drinking, transportation, eating,
accommodation and many more services that fulfil generosity purpose of clients and visitors.
The main motive of hospitality services is to fulfil the needs of individuals who are traveling
from one place to another. Travel and tourism is one of the crucial part or substitute of the
hospitality industry that satisfy the needs of visitor in effectual manner. This report is written
from the perspective of British airways. It is operating their business in hospitality industry from
the year 1974. In the present scenario, this is one of the international airline and along with this
one of the best world’s premium airlines. Moreover, it is divided into two different parts which is
Heathrow airport and Gatwick airport (Blanke and Chiesa, 2013). In this report the principle of
revenue management as well as human resource cycle in context of HR strategy is focused. In
the last, managing budgets and legal or ethical consideration will also be included in this report.
PART 1
Principle of the revenue management for hospitality industry
Revenue management
Revenue is one of the most important aspects for the organisation as it leads organisation
to earn essential income. Due to which operations of the British airways are performed on
regular basis. It is one of the most important concepts that allows airlines owner to forecast the
demand or upcoming opportunity in the organisation. It results that organisation is able to
achieve more financial performance due to which objectives and goals are achieved in
appropriate manner.
Yield management
This is defined as profits for the organisation, which is earned by management through
selling its asset that undertakes airline seats, price policy, hotel room etc. Further, all the
products and services which are offered by British airways are based on different rates, margin
and strategies to sale their products in market. In order to manage the yield in appropriate
manner British airways focus on segmentation of consumer and market through which needs and
demands of customer’s are fulfilled in effective manner.
Rational and principle of revenue management

Rational of revenue management- Revenue management is one of important tool that is
used for travel and tourism industry that helps to earn more revenue for business. In the context
of British airways the revenue model implement by management is mention as follow:
To reduce the cost- Booking trend and factors of ticket is depend on various aspects
which relates with traveller age, weather condition, peak season and economy of nation.
Therefore, it is mandatory for the multi-national organisation such as British airways to make
effective strategy for revenue management. Due to which it is easy for organisation to sale their
products at best rates. Along with this it also helps to reduce the cost of their service by utilising
all resources in exact manner.
Attracting guest- Majority of the hospitality organisation are providing their services at a
large scale. So it is mandatory for travel and tourist companies to fulfil maximum seats and
bookings for their rooms and flights. British airways formulate very policy due to which the
customer’s satisfaction level is increased. This results the repeating number of customers will be
increased by offering high quality goods and services to customers.
Marketing and branding- All existing organisations are performing their business at
international level. So it is mandatory for management to enhance their revenue by utilising
various techniques such as marketing and branding. The main motive to implement branding is
to perform increase income and cost. Along with this it is used to manage the hospitality and
revenue between all departments of the organisation.
Principle of revenue management- In order to increase the revenue for the organisation as well
as industry performance, it is mandatory for the authorities to develop various principle due to
which all business houses perform their work in effective manner (Boniface, Cooper and Cooper,
2016). Some essential principle related with tourism and travel industry is as follow:
Demand for services- The main motive for this principle is to reflect all the travel and
tourism demand on the basis of their data and information that is documented in organisation. On
the other side, by undertaking all detailed data it is effortless and effective for British airways to
develop effective pattern in order to offer and deliver their services appropriately to the
customers.
Overbooking- This principle defines that the sale of services and products is more than
the volume of the organisation. In context to earn benefits or revenue it is possible only if the
seats are cancel by the end user or consumer. Along with this, overbooking leads organisation to

boost their revenue by booking more tickets which is also beneficial to reduce the risk of
management.
Market segmentation- Customers as well as market of the organisation is divided into
various parts. It determines the taste and needs of all customers is different from each other. So it
is one of the positive factors for British airways to divide the market as per the similar needs of
customers.
Demand forecast and displacement analysis- With the forecasting of demand it is easy
for organisation to enhance their revenue by making an estimation of services and the methods to
deliver them. Like the demand of their services will be high in festive season such as Christmas
and new-year. So with the accurate analysis it is easy for British airways to cope up with the
sudden demand of their products (Capriello and et. al., 2013).
Tools for revenue management
There are various tools are used by management to measure their revenue some of them
are mentions as follow:
Proper fulfilment of space- This tools is used to utilise the minimum resources and to
generate maximum productivity from them. It results the consumer must provide proper services
so the revenue for organisation will be increased and utilised properly. Along with this the
number of British airways is fixed that generates minimum revenues for firms on constant basis.
Example- if the capacity of British airways is 80 then it is must be fulfilled in accurate manner.
Discount allocation- Loyal and regular customers are one of the major perspectives that
enhance organisational revenues and profits. As it increases the revenue for firm by generating
more leads for the management that enhance the sale of products and services of British airways
(Énalan and Soteriades, 2012). So to retain and generate loyal customer base British airways
must offer discount to their regular customers.
Impact of various pricing strategies
The different pricing strategies are related with various services that are based on the
quality of the products and services. Like geographical and weather conditions as well as micro
and macro environment due to which price of goods is impacted on positive manner and negative
manner. Positive aspect helps to target huge market, while negative aspect leads to decrease
brand value.
Implement of revenue management

Application for the revenue management is as follow:
To forecast demand and supply- Demand of products influence British airways in order
to earn high profits and revenue for business. In this context it is essential to manage the equal
demand and supply of products. So the problem will be overcome through effective management
(Gustafson, 2012).
Market segmentation- This is essential to target the market on all factors which are
consumers, competitor and pricing policy of market. So the outcomes for the organisation will be
better for the management.
PART 2
To manage human resources in the context of HR strategy
There are various stages of HR life cycle are followed by management which is used to
retain the right talent in the organisation. Essential stages for HR life cycle are mention as
underneath:
To hire right candidate- The decision related with the recruitment and hiring of employees
is one of the crucial decisions that is taken by British airways. This refers that there are various
task need to be manage by management. So it is better for organisation if they hire right
candidate at the right time for right position through conducting effective interview of them.
Moreover, in order to retain the right talent British airways provides keep motivate its
employee’s by organising various training programs for them.
Education- In the context of education process means that an employee must be aware
about the roles and responsibilities which are follow and fulfil by individuals to achieve their
goals and objectives in short intervals. In the context of retaining talent education also plays a
major role for the multi-national organisation (Kim, Ritchie and McCormick, 2012). Example-
Most of the employee’s in large organisation belongs to different backgrounds. So by
communicating essential information to them about organisational culture it is easy for
employee’s to perform their work as per rules and regulations of country.
Motivation- Employee’s turnover is one of the major issues which are faced by
organisation due to the performance and productivity of management is decreases. So it is the
responsibility of leaders to focus on generating positive bonds with the interns and employees.

Example- British airways motivated new individuals by providing them monetary benefits which
keep them engage to perform their work with high commitment.
Performance management plan for the travel and tourism job role
Performance management plan works as a process that is utilised by organisation to
formulate effective coordination between its employees and resources. The main aim to develop
performance development plan is to ensure that organisational goals and objectives are achieved
in minimum time period. From the perspective of British airways it is identified that staff
retention and development of talent are two major issue which generates problems for
organisation. So with performance management plan it is easy to develop steps that helps to
address all problems related with workforce of organisation. Techniques and method to solve
problems are mention as follow:
Specific job role and its performance management plan
Travel agent- The main motive of travel and tourism industry is performed by travel
agent. As they develop plans for the organisation and individuals that is used to perform their
work as they increase research work (Kwok and Yu, 2013). Moreover, it is also used to increase
the experience and knowledge of individuals. Along with this company also ensure that its tour
operators perform essential role in managing staff retention of employees to complete all task in
accurate manner. Some roles performed by them are flight booking, hotel selection and holiday
activities.
Performance management plan for the role of travel agent
 Objectives and goals- The goal of British airways is to increase the work area as per
the needs and objective of organisation. This determines it is the responsibility of
travel agent to increase the sale of their tickets. Moreover, with the proper mission it
is easy for management to provide right direction to its employee’s. So their efforts
are move towards the objective of organisation. The main goal of travel agent is to
enhance the sale of their work. Along with this all goals and objectives of
organisation are designed to perform work with motive of reducing employee
turnover by motivating individuals to perform all operations in effective manner.
 Proper consult with experts- British airways are performing their work at global
level. It refers that it is mandatory for authorities to consult with key players or expert
for making accurate decision. This determines with the effective decision making it is

easy for employee’s to achieve their goals in minimum time period (Lamsfus and et.
al., 2013). Professional persons perform various task that all are designed towards
accomplishment of goals that retain employees for longer period to perform their
operations and functions effectively. It is also the responsibility of the travel agent to
deal with experts about local areas. So the customer satisfaction level is increased by
providing their services.
 To create effective action plan- With an effective action plan it is for management
to complete their work with in minimum time period. As it helps to delegate the work
in exact manner through providing right opportunities to the right persons. In the
context of British airways there are various goals are divided into small task. This
results the management can perform their work as per strategic plan. Action plan
perform various roles and responsibilities but all are consider to manage its work that
is leading goals of company. The specific task relates with organisation is used to
retain staff for longer period. This results travel agent is able to earn more amounts of
profit by performing their work as per strategy.
Techniques to deal with staff retention and development of talent
 Managing functions- Major responsibilities of British airways is to perform all task and
operations as per skills and abilities of business. This is also used by management to
complete their task with help of leaders as they motivate employees to perform functions
effectively. Moreover, motivated employee's not left the organisation which work as
positive aspect for British Airways to control their employee's turnover. On other side,
motivation also help individuals to improve their performance. Like, training helps
individuals to gain skills by practice them on constant basis.
 Engagement of employees- This is important for organisation to engage all employees in
functions that are designed as per goals and objectives which is enhancing market area. It
also refers employees are more aware about daily operations so it work as positive factor.
Staff retention rate is also improved because engagement among workforce improve
communication system in business. Along with this in context of employee retention
engagement leads workforce to work as a team by communicating with each other in an
appropriate manner. So issue are resolved without interruption of management and also

as per guidelines. Moreover, for development of staff management implement task to
manage and complete all work according to task and objectives of British airways.
Performance management strategy- There is various changes are required by organisation to
achieve their objective and goals. This determines it is mandatory for employee’s for completing
and performing their role as per the market conditions (Ormond and Sulianti, 2017). Travel
agent enhances the sale of their services through formulating effective strategy for the
organisation.
PART 3
Legal and ethical consideration and its impact on business
Rules, laws, regulation etc. are some of the major standards that are followed by the
organisation for performing their work in a particular nation. This policy and rules are
formulated by the industry authorities and government which is used to ensure the interest of
local organisation. Similarly, legislation is describes as the rule that is enacted by authorities to
make decision that are long term beneficial for the British airways. But it is mandatory for
organisation to perform them as per rules and legislation of the country. Example- By following
the set standard for a product or service it is easy for management to sale or offers them at
competitive prices in market. This results that organisation is able to perform their work in
effective manner such as by performing their operations and activities in organised manner. This
result that organisation is able to gain top position in market.
Moreover, there is a specific job role is also identified for British airways that is of operations
agent. They are also known as airline operation agent and as per current market condition more
number of individuals travel from one place to another. So it is mandatory for organisation to
complete all work that helps to transfer information from one place to another within minimum
time period.
There are various issue are faced by British airways that impacts on goals and objectives due to
less productive operations. The major issue which is faced by management of British airways is
that employees are wasting more resources to complete work due to which its task are directly
impacted. Example- due to more resources utilisation unnecessary cost for operations is also
increased. So to deal with this operation agent monitor all transactions on routine basis to offer
and provide training to required employees.

Legislation, standard and regulations are determined as an essential part for law in which
laws worked as a directive approach for organisation (Smith, 2014). Most of the rules are
coordinated with the motive of providing benefits to customer as well as organisation. But in
context of the regulations it is developed with motive of developing the productivity for
organisation. All rules as well as regulations are based on local boundaries of country. So it is
mandatory for British airways to follow them in order to achieve high growth and success in
market. Further, all this rules and regulations are linked with each other. Example- if standard are
followed properly but legislation are not followed then it generates problems in the work
performance of British airways.
Law in context of airline sector
 Aviation act 1992, this act was formulated for protecting the interest of public individuals
in airline industry (Shaw and Williams, 2013).
 Civil aviation authority 1991, in this act authorities provides responsibility and authority
to employees in similar manner.
 Civil aviation act, 2006.
Contract and employment law and their impact on decision making in airline industry
Contract law can be defined as an agreement of employees and employer that is based on
their work. These contracts are developed in the written form so both parties will not face
conflicts in the future. Some rules implemented in contract act are as follow:
 Contract act, 1990- This act considers several entities of the business. So it is
mandatory for organisation to follow them as per the agreement. On other side, it also
helps management to improve their goodwill in market. This is also approaching
government and industries to perform work as per supply act that signify acceptance for
organisation relates with act, promises etc. that are promised by contractor to its
employees. British airways and customer's are two parties who generate contract for
travel from one place to another. The impact of contract act, 1990 on British airways if
decisions aspects on provide services like, if services are not offered according to
contract than buyers has right to void the contract. It results decisions taken by company
and personnel are positive for organisation that motivates all employees to perform
operations properly within organised manner.

 Minimum wage act, 1998- All the employees who are engage in organisational
operations and functions must be paid minimum and fair amount as per their skills.
Moreover, if the organisation not implements such act then they has to face legal action
by the industry or government. Minimum wage impact on decision-making as if
employee's wages are not provided according to decided rules than workers contradict
and break service contract. Moreover, minimum wage act also effect on decision-
making because this reduce number of employee's if individuals are paid with low wage
as compare to other organisation. It also impacts on business decision making for each
role that relates with operations and functions of organisation. This is also beneficial to
make effective decisions that leads company to perform work in effective manner.
 Employment law, 1996- The employment law regulates relationship between
employees and employers that governs better results for organisation. This also
determines that there are various task performed by management which demonstrate
various employees are engaged in company departments to complete all task and
operations with rights, participate and effective leadership style. This also leads
management to fulfil and formulate demand of positive working environment. In present
scenario, employee’s are most important asset for company so it effective on decision-
making as inappropriate decisions impacts on behaviour of employee's. This also leads
firm to operate functions properly because it is difficult to copy by other organisation.
Moreover, it also includes equal pay act, sex discrimination act and many more that
relates with employees and company benefits and the impacts on decisions to perform
business in effective manner by taking decision in favour of employee's.
Impact of regulation, standard and legislation
All types of industries must follow their rules and regulations in order to complete their
work in effective manner. Most of this decisions related with law are formulated by individuals
rather than organisation (Standing, Tang-Taye and Boyer, 2014). It governs that all decision are
based on various aspects due to which culture, value, system and structure of the organisation is
not impacted by the decision of management. So with the follow of rules and regulations British
airways improve their image in the society and market.

PART 4
To manage budgets and maintaining of financial and statistical records
Working as a travel agent for the British airways, there are various responsibilities are
assigned by management such as to sale more tickets, to manage accommodation of clients and
many more. So to deal with financial problem British airways makes effective plans through
forecasting and monitoring all essential aspects of the organisation that are related with financial
perspective of management. Some of the effective ways that are used by organisation for
performing their work is mention as follow:
Types of financial statement
Financial statement can be defined as the picture for organisation that represent the
performance of their work in the market. With the proper planning, budgeting and forecasting it
is easy for organisation to achieve their financial results effectively (Swarbrooke and Horner,
2012). Along with these some various ways by which budgets, financial and statistical records
are managed for better results. Some type of financial statements is defines as follow:
Balance sheet- This is also known as a statement of financial position that undertakes a
detailed statement about the balances of organisation. Balance sheet is prepared at the end of
financial year which show the existing financial position of organisation. Moreover, it undertakes
asset as well as liabilities of the organisation.
Income statement- It works as a part of the financial statement that describe financial
performance of organisation. Process of income statement, start from recording of sale of their
products or service which represent the earning from clients and then to reduce all the expenses
from revenue. So the net profits of the organisation will be undertakes.
Cash flow statement- It is one of the most important statement for the organisation which
represent the inflow as well as outflow of organisation which is related with cash activities of the
organisation. If outflow is excess than inflow then organisation has pay more to outsiders.
Moreover, it is divided into three parts which are operating, financial and investing.
Value of budgets
Budget works as the estimation of revenues and expenses that is earned by the
organisation for a particular year (Webster and Ivanov, 2014). It is defined as a pre-plan activity
which assist the organisation to spend minimum money in order to complete their operations
effectively.

 Budget reduces the unnecessary expenses of the organisation.
 With the proper budget estimation it is easy for British airways to generate emergency
funds.
 The budget report help to discover the money related with inflow and outflow that is
linked with cash activity.
Explanation of financial statement and report
The annual report of British airways is estimated which is used to generate profit in order
to deal with tax funds. Income statement of the organisation is 1744. After the tax deduction the
uncertain and remaining amount is 1403. Some calculation related with ratio is mention as
follow:
Net profit ratio – Net Profit/Net sales*100
Profitability ratio 2017
Net profit 1403
Net sales 12226
0.11
Gross profit ratio = Gross profit/Net sales*100
Profitability ratio 2017
Gross profit 1774
Net sales 12226
0.15
Return on equity = Net income/Shareholders equity
Profitability ratio 2017
Net income 1403
Shareholder's equity 5774
0.24

Current ratio = Current assets/current liabilities
Liquidity ratio 2017
Current assets 4518
Current liabilities 5468
0.82
Quick ratio = Quick assets/Current liabilities
Liquidity ratio 2017
Quick assets 3752
Quick liabilities 5468
0.68
Asset turn over = Cost of goods sold/Total assets
Efficiency ratio 2017
Cost of goods sold 17326
Total assets 16678
1.04
Inventory turn over = Net sales/Inventory
Efficiency ratio 2017
Net sales 12226
Inventory 766
15.96
Debt to equity ratio = Total long term debts/Shareholders fund
Financial ratio 2017

Total equities 5974
Total liabilities 16678
0.36
Earning per share = Net profit after tax & preference dividend/No of equity shares
Investing ratio 2017
Net profit after tax & preference dividend 1403
No of equity shares 5974
0.23
Comparison of the financial performance
By analysing all above ratio, this is determines that various strategies are required by the
organisation in order to perform their work effectively (Xiang, Magnini and Fesenmaier, 2015).
This results that organisation is able to fulfil their work by considering all of its needs as per the
requirement of British airways and market condition. According to the annual report financial
performance of the organisation the tax related showing possibilities better results and profits. It
show the better results which is increasing with 5% for each year.
CONCLUSION
In the end, by analysing all the above report it is concluded that travel and tourism industry
is growing with rapid speed. This governs that hospitality sector is growing with fast approach.
Along with this there are various tools and principle are utilised by industry which enhance the
sale as well as revenue of the organisation. Human resource strategy also helps management to
recruit right candidate for the vacant seat. Moreover, to operate their business in the hospitality
industry an organisation must follow various rules, regulations and legislation due to which the
action and activities are performed in accurate manner.

REFERENCES
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