Function-space Revenue Management

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Managing function-space revenue is more difficult than dealing with transient guest rooms because of the interaction of function space with room sales and food and beverage demand. While function space will reap most of its revenue management benefits from pricing, this is not to downplay the role of duration control.

Duration control. Duration can be managed in four ways: refining the definition of duration, reducing arrival uncertainty, reducing duration uncertainty, and reducing the amount of time between functions. 5 Each is briefly described and the issues associated with each discussed.
Definition of duration. Most hotels define function-space duration by day part, but the definition and number of day parts varies by hotel.
Since events can span multiple day parts or use only a fraction of a day part, we suggest that hotel function-space managers define duration as
an hour. Most computerized systems track this information, but it may be difficult to retrieve.

If it’s impossible to track the function-room schedule by the hour, tracking by day parts will work, as we demonstrate below.
Arrival uncertainty. Arrival uncertainty involves two factors: (1) the timing and quantity of requests, and (2) the no-show and cancellation rates of booked events. Determining the timing and number of requests from different market segments is a challenging task. Hotels still have a great deal of difficulty with forecasting their demand for group rooms, and most have not even attempted to forecast their functionspace demand.6 If a hotel can obtain information on the lead time and the amount of business of major market segments, it can make better decisions regarding the level of demand from key customers, when that demand will occur, and when to release space to other market segments.

While hotels have a difficult time in forecasting function-space demand, they do a good job of reducing cancellation and no-show rates by requiring nonrefundable deposits and prepayments for function space. In some highdemand cities, hotels even require prepayment for the requested number of guest rooms connected to the function-space reservation. This practice protects those hotels from holding room blocks that no one picks up at the agreed-on rate. 

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About Sherri Kimes

Professor Kimes  Is considered to be one of the top thought-leaders and experts in Revenue Management in the world. She has been working in Revenue Management since 1988 and has had the privilege of helping to educate some of the top leaders in Revenue Management. She frequently engages with corporate, government, education, advisory, legal, and private equity

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About Kelly McGuire

Kelly McGuire is an analytics evangelist, passionate about helping the hospitality and travel industries realize the value of data-driven decision making. I focus on connecting the dots between strategy, business process, technology and execution. I have a background in revenue management. I have also worked extensively in marketing analytics and hospitality operations. She adept at facilitating integration

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