Summary Revenue Management
Index
Chapter 1: Introduction to Revenue Management .................................................................................. 2
Chapter 2: Strategic Pricing...................................................................................................................... 4
Chapter 3: Value ....................................................................................................................................... 5
Chapter 4: Differential Pricing .................................................................................................................. 6
Chapter 5: The Revenue Manager’s Role ................................................................................................. 8
Chapter 6: Forecasting demand ............................................................................................................. 10
Chapter 7: Inventory and Price Management ........................................................................................ 12
Chapter 8: Distribution Channel Management ...................................................................................... 14
Chapter 9: Evaluation of Revenue Management Efforts in Lodging ...................................................... 15
Chapter 10: Revenue Management for Food and Beverage Services .................................................... 18
Chapter 11: Evaluation of Revenue Management Efforts in Food and Beverage Services.................... 20
Chapter 12: Specialized Applications of Revenue Management............................................................ 21
Chapter 13: Building Better Business ..................................................................................................... 23
Formulas ................................................................................................................................................. 27
1
, Chapter 1: Introduction to Revenue Management
Revenue = The total amount of sales achieved in a specific time period.
Number of units sold x Unit price
Hospitality business = An organization providing food, beverages, lodging, travel, or
entertainment services to people away from home.
Sales = Costs + profit
Profit = Revenue – expenses
Profit = The net value achieved by a seller and a buyer in a business
transaction.
Barter system = A trading system in which goods services are exchanged without the
use of money.
Money = An acceptable medium of exchange used as the measure of the value
of goods and services.
Economics = The area of study concerned with the production, consumption, and
transfer of wealth.
ROI = Owner’s investment return / owner’s original investment
Revenue manager = The individual or team responsible for ensuring that a company’s
price match a customer’s willingness to pay.
Customer-centric revenue management = A revenue management philosophy that places customer
gain ahead of short-term maximization in revenue management decision making.
Channel = A source of business customers. Also, a vehicle used to communicate
with a source of customers.
Constrained supply = The condition that exists when sellers cannot readily increase the
amount of products or services available for sale when consumer
demand for them increases.
Hard constraint = A supply constraint that cannot be removed regardless or product
demand. Hotel rooms and the capacity of natural gas pipelines.
Soft constraint = A supply constraint that can, with sufficient lead time, and/or
reasonable expense, be removed or lessened. Commercial airline and
car rental industries.
Yield management = A demand-based revenue management strategy, first initiated by
commercial airlines companies. It seeks to maximize income via
manipulation of selling prices.
Overbook = To accept reservations for more rooms than a hotel has available or
in inventory.
ADR = Total room revenue / total rooms sold
Occupancy % = Total rooms sold / total rooms available for sale
RevPAR = ADR x Occupancy percentage
RevPAR = Total revenue / total rooms available for sale
2
Index
Chapter 1: Introduction to Revenue Management .................................................................................. 2
Chapter 2: Strategic Pricing...................................................................................................................... 4
Chapter 3: Value ....................................................................................................................................... 5
Chapter 4: Differential Pricing .................................................................................................................. 6
Chapter 5: The Revenue Manager’s Role ................................................................................................. 8
Chapter 6: Forecasting demand ............................................................................................................. 10
Chapter 7: Inventory and Price Management ........................................................................................ 12
Chapter 8: Distribution Channel Management ...................................................................................... 14
Chapter 9: Evaluation of Revenue Management Efforts in Lodging ...................................................... 15
Chapter 10: Revenue Management for Food and Beverage Services .................................................... 18
Chapter 11: Evaluation of Revenue Management Efforts in Food and Beverage Services.................... 20
Chapter 12: Specialized Applications of Revenue Management............................................................ 21
Chapter 13: Building Better Business ..................................................................................................... 23
Formulas ................................................................................................................................................. 27
1
, Chapter 1: Introduction to Revenue Management
Revenue = The total amount of sales achieved in a specific time period.
Number of units sold x Unit price
Hospitality business = An organization providing food, beverages, lodging, travel, or
entertainment services to people away from home.
Sales = Costs + profit
Profit = Revenue – expenses
Profit = The net value achieved by a seller and a buyer in a business
transaction.
Barter system = A trading system in which goods services are exchanged without the
use of money.
Money = An acceptable medium of exchange used as the measure of the value
of goods and services.
Economics = The area of study concerned with the production, consumption, and
transfer of wealth.
ROI = Owner’s investment return / owner’s original investment
Revenue manager = The individual or team responsible for ensuring that a company’s
price match a customer’s willingness to pay.
Customer-centric revenue management = A revenue management philosophy that places customer
gain ahead of short-term maximization in revenue management decision making.
Channel = A source of business customers. Also, a vehicle used to communicate
with a source of customers.
Constrained supply = The condition that exists when sellers cannot readily increase the
amount of products or services available for sale when consumer
demand for them increases.
Hard constraint = A supply constraint that cannot be removed regardless or product
demand. Hotel rooms and the capacity of natural gas pipelines.
Soft constraint = A supply constraint that can, with sufficient lead time, and/or
reasonable expense, be removed or lessened. Commercial airline and
car rental industries.
Yield management = A demand-based revenue management strategy, first initiated by
commercial airlines companies. It seeks to maximize income via
manipulation of selling prices.
Overbook = To accept reservations for more rooms than a hotel has available or
in inventory.
ADR = Total room revenue / total rooms sold
Occupancy % = Total rooms sold / total rooms available for sale
RevPAR = ADR x Occupancy percentage
RevPAR = Total revenue / total rooms available for sale
2
