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’.