Revenue management Due to the economic crisis that began in autumn 2008, the hotel business is very hurt. One of the first articles companies reduce costs become trips, conferences and trainings. The level of family holidays also declined – families are hesitant to actively spend weekends or holidays, because they do not believe in the stability of their work, or worse – have already fallen under the reduction. Now, during the crisis, the owner of the hotel to sell profitable your business will be difficult.
Hotel management principles and practice regulations
Many owners are forced to endure the difficulties of this difficult period and try to do the best possible in the current situation. It is necessary to focus on the main operating activities – try to do more than the competition, and at the same time minimize costs. The owner must ensure that the operating and management companies do not relax because of the crisis and continue to work as a team. Tough times give us a chance to take a closer look at the investment and operational activities to determine whether to make every effort to achieve the best results.
Revenue Management (Revenue the Management)
2007 and the first half of the 2008’s were a period of the boom for the hotel business in Ukraine. Room rates reached the level of Paris and Rome, while the costs and salaries were on the “local” level. In this situation, the case in most hotels situation was just brilliant. Since the results were more than good, cost control was not always sufficiently rigorous.
Today the situation has changed dramatically and the number of business travelers has significantly decreased in comparison with what it was at the beginning of last year. Hotels can not adapt to change and continue to hold high the cost of the hotel rooms, whereas a slight decrease in prices could be a lot more sales. After all, today the balance between the declared value of the rooms and the planned sales volume at a particular time is a key tool for operating activities.
Provide loading hotels due to the low cost of the rooms are quite simple, but it will not bring big profits. Just reduce the volume of sales, setting the high cost of rooms – also not the best solution. In this case, you need to find a middle ground. A key role in addressing these issues plays a managing income (Revenue Manager). He should be the third most important person in the hotel (after the CEO and CFO) and have a fixed place in the executive committee.
History of revenue management
The science of revenue management, came into the hotel business from the aviation industry, a significant spread and gained recognition only in the last 8-10 years. Since 2005, the hotel industry have established an impressive price and high loading of number fund performance. Of course, first of all, this was due to the favorable economic climate, but it is art revenue management has allowed hotels make the most of this opportunity. International hotels, using revenue management techniques, have achieved good results, and soon these methods were adopted as necessary for the profitable operation of the hotel.
The object of study in revenue management in hospitality industry
The object of study in revenue management may be different. In the hospitality industry need to focus mainly on the income from the sale of the number of rooms, respectively 85-90% of revenue management initiatives directed to the number of rooms. And this is justified, since the profitability of sales of high numbers – any increase in the price per room or the number of rooms sold are converted almost 100% of the line in the final report.
The term “yield management” For a long time was not clear for many hoteliers. It refers exclusively to the field of finance, causing the majority of the Governors income were “sent back to the desk,” the finance department to build their graphs and tables. Now, on the contrary, revenue management complements the role of the sales and marketing department, and even there is a tendency, when the director of marketing and sales manager report income.
Revenue management function – to anticipate demand. For pricing and material asset management technology can be used to maximize the potential of the “perishable inventory.” After all, if the number is not sold today – is a loss forever.
The essence of revenue management is to develop accurate forecasts of sales and earnings, which reflects changes in the demand for the product. Then tactic prices of construction and room volume in a particular period may be aimed at optimizing results. It is extremely important to “sell the right product at the right time, at the right price in the right place at the right guest.” Therefore, the three main components – time, price and volume – are used together to maximize profits from sales of the product, which can not be “stored” (you can not sell a room at the expense of yesterday “yesterday” downloads). The product in this case can act as a room or a place in a restaurant, spa entry, and so on. N.
Revenue Management is closely related to forecasting, pricing and application of tactics. Demand is subject to constant change, so the hotel business has to react quickly to market changes. And where the practice of revenue management techniques, profit growth in terms of “average revenue per room» (Revenue per available room (RevPAR)), as a rule, up to the level of 4-7%.
We convert as much as we can
Gross operating income (Gross Operational Profit) – is income minus expenses. We can directly control costs, and any changes in this area will have an immediate and direct financial impact. On the contrary, we have less opportunity to influence their income – it is impossible to calculate the exact volume of sales in the particular time at a particular price. We can only make sure that we have the right product in the required amount, which is available at the right time and the right price is offered, and hope that the potential client will take a positive decision on the purchase of this product. But even in this case we can not be entirely confident of success – competitors, for example, can lower their prices, and then in their background will look our prices are too high.
New market conditions have become a great challenge for many people, and it definitely will be a problem in the coming year. Only measures to increase the profitability of the enterprise can ensure the management is still a profitable business. You can expand the business, and you can apply revenue management techniques, thus achieving a greater return on existing business. Decisions should be based on a more cautious approach to the organization of business processes and the speed of your response to market change is expected to increase as a result of more accurate forecasting. Even during the recession fall excellent business opportunity, and you have to use each of these chances.
All marketing activities are aimed at a specific segment of potential visitors in order to anticipate their needs and to persuade it to make a choice in favor of your hotel. They will evaluate your offer, price, availability and other factors that determine the choice. All of this information is usually provided through a distribution network. The same channels are used for transmission of information on new bookings, so the system of direct sales and marketing are closely linked. Your goal – to use these relationships to increase business potential and gain financial benefits from this.
As shown in Fig. 1 efforts to stimulate sales and marketing will have the maximum effect only if the sales strategy and marketing to build in accordance with the revenue management strategy and distribution of goods. Market share and sales promotion to increase sales only up to a point – revenue management ensures the highest level of impact of these initiatives. After all, you do not just make a difference in your business. Your task – to establish the best price of the options and to abandon the changes, if there are fears that they entail a shift of your business with the “premium” segment.
Optimal conditions for the implementation of revenue management techniques
Revenue management principles are applicable to any business environment. They are ideal for the hospitality industry. Optimal conditions required for the implementation of revenue management techniques, as follows:
Container resources for the sales to be fixed – fixed number of hotels have rooms available for sale; maintaining a flexible counting rooms – deviation from the norm;
Resources should be considered as a perishable product – numbers may not be sold today sold tomorrow at the expense of percent yesterday downloads (rooms sold in advance prior to their actual use);
Demand can be segmented for different markets or price levels.
Hotels that meet all of the conditions listed above, using revenue management techniques will be able to show the best results. The size and style of the hotel, as well as the market is running the hotel, will have an impact on compliance with each of these conditions. For example, your market may be limited geographically, or you have to set prices according to government instructions. However, your product likely will meet at least two of the three requirements described above.