HOSPITALITY REVENUE

MANAGEMENT

By Dr.G. Saravana Kumar

BMS – JAIN UNIVERSITY

What is Revenue Management ?
 Its the application of information system and
pricing strategies to allocate the right
capacity to the right customer at the right
price at the right time. (Kime,2004)
 Its basically supply and demand

management that helps a firm maximize

revenue by balancing pricing and inventory
controls.

BMS –THM- JAIN UNIVERSITY

Why Revenue Management ?

 If there is no Revenue Management system

followed , a hotel may loose potential
revenue, increase in costs and wastage of
inventory.
 Because a room not sold today, cannot be
sold tomorrow..!!- Its perishable !

BMS –THM- JAIN UNIVERSITY

Necessary conditions for RM

 Relatively fixed capacity

 Perishable inventory
 Ability segment markets
 Possibility of forecasting demand

BMS –THM- JAIN UNIVERSITY

What is Rev-Par ?
 Its Revenue Per Available Room
How is Rev Par calculated ?
 Rev Par = Total Room Revenue
No. of Rooms available
For e.g Rs 2,00000 revenue & 50 rooms
Rev par = 200000 = Rs 4000
50

BMS –THM- JAIN UNIVERSITY

What is ARR ?
 Its std term used by hoteliers and it helps to
know the average selling price of a hotel
room and we know the std of the hotel.
 ARR = Total Room Revenue

No.of Rooms sold

for same hotel = 200000 = Rs 5000 is ARR

40

BMS –THM- JAIN UNIVERSITY

Managing duration

Duration means how long the guest is going to stay(days) or it

may depend on an event till the wedding is over or festival is
over. The Hotel FO manager has to be tactfull in selling the
rooms to the guest who is going to stay for longer duration, in
order to get more revenue.

BMS –THM- JAIN UNIVERSITY

Reducing duration uncertainity
 The guest makes reservation but no show

CONTROLS
 Collect advance
 Inform penalty-cancellation/ No show

charges.
 Make guests accountable & responsible.
 Collect deposit

BMS –THM- JAIN UNIVERSITY