Question

Describe revenue management and explain tools used by revenue managers.

Answer 1

This is an excellent topic for bringing in a guest speaker. Revenue Management is still a growing field in the hospitality industry and many hotels now have an in-house revenue manager that might be able to speak to your students.

The concept behind revenue management is to manage revenue and inventory effectively by pricing differences based on the elasticity of demand for selected customer segments. Revenue management involves upselling, cross-selling, and analysis of profit margins and sales volume for each product line. Revenue management system is used to maximize a hospitality company’s yield or contribution margin. 

Revenue management systems must be based on sound marketing. They should be developed with the long-term value of the customer in mind. Revenue management programs should focus on long-term profitability, not just the maximization of one day’s revenue. If used properly, revenue management systems can provide extra revenue. A good revenue management system benefits both the hospitality company and the guest. It opens low-rated rooms for the leisure traveler during times of low occupancy and saves rooms during periods of peak demand for the business traveler willing to pay full rates. The company gains because revenue management focuses on maximizing revenue, not cutting costs.

 

Invite revenue management professional to discuss strategies optimizing revenue through pricing, inventory management, and customer value considerations.