Hotel Revenue Management: From Theory to Practice

Book Discription

This research monograph aims at developing an integrative framework of hotel revenue management. It elaborates the fundamental theoretical concepts in the field of hotel revenue management like the revenue management system, process, metrics, analysis, forecasting, segmentation and profiling, and ethical issues. Special attention is paid on the pricing and non-pricing revenue management tools used by hoteliers to maximise their revenues and gross operating profit. The monograph investigates the revenue management practices of accommodation establishments in Bulgaria and provides recommendations for their improvement.

The book is suitable for undergraduate and graduate students in tourism, hospitality, hotel management, services studies programmes, and researchers interested in revenue/yield management. The book may also be used by hotel general managers, marketing managers, revenue managers and other practitioners looking for ways to improve their knowledge in the field. 

Introduction to hotel revenue management

Revenue management, also known as yield management, is an essential instrument for matching supply and demand by dividing customers into different segments based on their purchase intentions and allocating capacity to the different segments in a way that maximizes a particular firm’s revenues (El Haddad, Roper & Jones, 2008). Kimes (1989) and Kimes & Wirtz (2003) define revenue management as the application of information systems and pricing strategies to allocate the right capacity to the right customer at the right price at the right time.

Economic fundamentals of hotel revenue management

Setting prices for hotel rooms based on supply and demand. Managing inventory by allocating rooms across different distribution channels, such as direct booking and online travel channels, and setting minimum lengths of stay. Forecasting demand and adjusting prices accordingly

Book Information

Print Length

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205 Pages

Language

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English

Publisher

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Zangador Ltd

Publication Date

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2014

Dimensions

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05 X 6 X 9 inches

ISBN-10

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ISBN-13

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978-954-92786-3-7

About The Author

About Stanislav Ivanov

Stanislav Ivanov (‘Stan’) is a Professor in Tourism Economics and Vice-Rector (Research) at Varna University of Management and Director of Zangador Research Institute. He is the founder and the Editor-in-chief of two academic journals: the European Journal of Tourism Research (indexed in Scopus and Web of Science) and ROBONOMICS: The Journal of the Automated Economy. Additionally, he

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Table Of Contents

Revenue management, also known as yield management, is an essential instrument for matching supply and demand by dividing customers into different segments based on their purchase intentions and allocating capacity to the different segments in a way that maximizes a particular firm’s revenues (El Haddad, Roper & Jones, 2008). Kimes (1989) and Kimes & Wirtz (2003) define revenue management as the application of information systems and pricing strategies to allocate the right capacity
to the right customer at the right price at the right time.

Hotel revenue management is based on several economic fundamentals and assumptions (Ivanov & Zhechev, 2011; Kimes, 1989; Schwartz, 1998; Wirtz et al., 2003) that determine the applicability of revenue management as a practice in the hotel industry.

When the customer sends an email query to the hotel, calls by telephone, checks availability on the hotel’s/chain’s website or in an online hotel reservation system, the booking request he made is registered by the hotel’s revenue management system. The RM system consists of four structural elements (data and information, hotel revenue centres, RM software and RM tools), the RM process and the RM team.

Hotel revenue management uses various metrics that show the effectiveness and the efficiency of the hotel to generate revenues (Mauri, 2012). Some of them measure the
performance of the revenue management system and process in the hotel and are specific for the industry, while others are more general and relate to the financial health of the company (e.g. profitability and liquidity ratios).

Segmentation refers to the process of dividing the consumers into distinct groups with similar set of needs and wants requiring the development of different marketing mixes by the hotel. Consumers within each segment are homogeneous on one or more segmentation criteria but may be very heterogeneous on other criteria. From a revenue management perspective segmentation is used to identify the ‘right’ customer(s) for the hotel.

A good revenue management decision is an informed decision. As discussed in Chapters 3 and 4 the revenue manager needs very detailed data on various statistics in order to make a justified decision which are provided by the hotel’s marketing information system

Analysis of data for operations, customers, competitors, distributors and the macroenvironment is implemented on three levels: strategic, tactical and operational (Figure 8.1). Results from the analysis are used in forecasting which, on the other hand, is a necessary prerequisite for effective revenue management decisions

Forecasting is a key stage in the revenue management process as forecasts feed and determine the decision-making process (Figure 8.1). Therefore, a high proportion of
the related research literature is dedicated to forecasting from a theoretical and methodological perspective (Burger
et al., 2001; Frechtling, 2001; Tranter, Stuart-Hill
& Parker, 2008; Weatherford, Kimes & Scott, 2001; Weatherford & Kimes, 2003, among others), summarised in Table 9.1.

Value is much discussed in academic literature but also a very elusive and vaguely defined marketing concept. Neap & Celik (1999) state that the ‘value of a product reflects the owner(s)’/buyer(s)’ desire to retain or obtain a product’. Therefore following their definition, the product has value for both the hotel and its guests. Woodruff (1997: 140) elaborates that the concept of customer value ‘takes the perspective of an organization’s customers, considering what they want and believe that they get from buying and using a seller’s product’.