The hotel or hospitality industry relies on guests who visit their facilities. In order to understand and project revenues it is critical that operators in the industry know how to calculate revenues. On the other hand revenue management in any business not only in the hospitality industry is important. Considering the perishable nature of hotel rooms as the main product under sale, it is important to focus on customer satisfaction in order to increase revenues. Therefore, hotel yield or revenue management is about balancing the demand for hotel rooms and the capacity through proper forecasting in order to maximize effectiveness of resources.
Understanding customer behavior is an important aspect in every business and managers should endeavor to make their customers happy at all times. This takes in consideration the nature of bookings and how to manage them in order to eliminate wastage of hotel rooms.
In the three scenarios, the main thing in scenario one is to understand the hotel occupancy rate and the average daily rates. In the two hundred and forty rooms available, the rate will be calculated by taking the number of rooms sold and divide it by rooms available which is then multiplied by a hundred to make it a percentage. For example, the two hundred and forty rooms sold divided by three hundred rooms available multiplied by one hundred - 240/300x 100 which gives the occupancy rate at eighty percent. On the other hand the average daily rate (ADR) is calculated by dividing the total number of room sales by the rooms sold. In this case it will be 85x 98 / 85, 65x90/65 and 90x 75/90/85 which give 85%, 65% and 90% respectively.
In order to calculate the yield, the revenue realized is divided...
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...or is considering the extra room left by the jazz group which can still be sold and make more profit compared to the governor’s group. Therefore, the best decision would be to host the jazz group which creates room for extra sales.
Hotels like any other service or hospitality industry uses revenue management in maximizing their revenues by quantifying both the constrained and unconstrained demand levels. Additionally, it measures the speed with which to institute restrictions on non refundable rates, length of stay in the facility and prediction of arrivals. As a management toll, revenue management has enhanced cost control, distribution channels and getting the right marketing mix in the business. In summary, revenue management is critical in the hotel industry for sales of rooms and services as the main products at the right price, time and right people.
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