Revenue Management: Maximizing Revenue in Hospitality Operations

By. Gabor Forgacs 24th Apr 2010

Book Discription

Revenue Management: Maximizing Revenue in Hospitality Operations

This is a highly concise and easily digested book that provides an interesting and contemporary review of Revenue Management and its underlying key principles. In a textbook of 112 pages spanning five chapters, the author has been able to deliver a brief history of Revenue Management and subsequently develop key concepts and their application as they relate to the modern hospitality sector.

The use of ‘Industry Insights’ throughout the book draws upon specific industry cases and gives illustrative examples that help contextualise the key topics. Industry examples are also drawn upon throughout the text, with supporting worked examples and illustrations. As such, the text will appeal to both experienced practitioners and those new to this highly relevant topic. It will particularly suit students who are studying Revenue Management as part of a Hospitality Business Degree, as well as those studying associated disciplines. The key principles outlined will be of use to both undergraduate students and postgraduate students perhaps studying the Hospitality sector for the first time.

Combining theory and practice, each chapter is clearly constructed and introduces the fundamentals of the topic. At the beginning of each chapter, a clearly defined outline and suggested questions are provided to demonstrate competency in the specific topic area. This gives students/practitioners a chance for reflective practice and further discussion.

At the end of each chapter are endnotes and Website links, where appropriate, that identify further industry resources, and a list of references.

Revenue Management provides a solid understanding of revenue management’s key concepts and the selective application of its most effective strategies for hospitality operations. This new book explores the applicability of revenue maximization strategies and their operational aspects. It provides readers with a concise understanding of this important discipline.

Book Information

Print Length

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121 Pages


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Amer Hotel & Motel Assn

Publication Date

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April 01, 2010


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7.0 x 0.3 x 8.8 inches


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About The Author

About Gabor Forgacs

Dr. Gabor Forgacs has twenty years work experience in the hotel industry on two continents including a management position at a Four Seasons hotel in Toronto, Ontario, Canada and the position of president and general manager of a full service hotel in Budapest, Hungary. He teaches at the Ted Rogers School of Hospitality and Tourism Management at

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Table Of Contents

Chapter 1, What is Revenue Management, provides the context for the remaining chapters by providing a brief history of Revenue Management. It builds upon the development of ‘Yield’ principles that were borne out of the deregulation of the US airline industry in 1978. The chapter also usefully discusses the Yield Management versus Revenue Management terminology. It also illustrates Revenue Management as a Business Process. This chapter then develops to include ‘Criteria for Effective Use’, and discussions and illustrations around operating in a ‘Fixed-Capacity Environment’, looking at hotel rooms as ‘Perishable Products’, identifying ‘Varied but predictable Demand’ and analysing the implications of ‘High Fixed Costs and Low Variable Costs’.

Chapter 2, Measurement, focuses on Measurement, with specific reference to Internal and External measures, together with ‘Measurement Challenges’ typically found when managing a hotel or ‘other lodging operation’. What is particularly useful about this chapter is the explanation of quantifiable measures and their method of calculation; for example, Average Daily Rate, Revenue per Average Room and Gross Operating Profit per Available Room. The chapter also encourages readers to identify External measures that might usefully compare hotel performance with that of its competitors. As such, it considers criteria such as geographic location, amenities, rates and brand affiliation that can help identify a hotel’s strengths within the ‘Competitive Set’ – that is, the group of hotels that may be considered in direct competition with your own. This topic is further developed and discussed within an ‘Industry Insight’ from Scott Farrell from Travel CLICK. The chapter continues with example data sets that help identify market share and concludes with some thoughts on the challenges of performance measurement to include accuracy of measurement, tracking and benchmarking.

Chapter 3, Tactical Revenue Management, is a key chapter that develops the important topic of forecasting and discusses the importance of both short-term and long-term forecasting, drawing on the latter as a basis for strategic Revenue Management. The components of forecasting are clearly presented, with explanation of specific industry terms such as ‘wash factor’ and ‘spill factor’. Segmentation is discussed, and suggested ‘clusters’ for forecasting are identified; that is, breaking down forecast information by market segment, price category and/or duration of stay. Constrained and unconstrained demand is clearly and thoroughly explained, with useful commentary on the ‘total spend’ and ‘lifetime total value’ of clients in consideration, which ties in with the broader strategic elements of Revenue Management.

Particularly useful in this Chapter is the explanation of ‘Tactical Rate Management’ and the discussion of key terms when considering rates such as ‘Rack Rates’, ‘Corporate Rates’, ‘Group Rates’, Promotional Rates and so on. Further explanation of tactical discounting and dynamic pricing are given, with an ‘Industry Insight’ from Marriott International enforcing the key principles of dynamic pricing. Also within this chapter is an ‘Industry Insight’, which focuses on ‘Overbooking’, a key consideration for anyone studying this topic.

Chapter 4, Strategic Revenue Management, is the most detailed chapter in the book. It looks at Demand Generation, Marketing Strategies for Revenue, Strategic Pricing, Strategic Packaging, and, importantly, Distribution Channel Management. In discussing the Strategic element of the subject area, some key concepts such as the Marketing Mix and Customer Relationship Management are introduced in the context. In discussing Distribution Channels, the topic is brought up-to-date in terms of the way business is managed and conducted. In so doing, it identifies key concepts within this area, such as Global Distribution Systems, Business to Customer Models, Agency, Merchant, Hybrid and Opaque models. Some of these terms may be new to seasoned practitioners, but the clear explanations given will help identify current trends and develop the readers’ competencies in these areas.

Chapter 5, Revenue Management’s Place in Hotels, helps contextualise the Revenue Management process in more detail by presenting an overview of some Automated Systems. Capabilities of these systems are examined, while emphasising the importance of ‘Human Intelligence’ versus ‘Artificial Intelligence’. The chapter concludes with an overview of the position of the ‘Revenue Manager’, drawing upon task lists and competencies in this ever-evolving role.

Overall in this publication, the context of the subject area is well presented. Both the origins and development of the topic, together with contemporary developments, that is, Distribution Channels Management, ensure that the information is up-to-date. Chapters are well written and give clear examples throughout, while additional ‘industry insights’ allow for further contextualisation. As such, this is a concise but detailed introduction to an ever-evolving topic.