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Revenue Management and Yield Technique | Dipak Haldar

Revenue Management for Hotel 
Dipak Haldar 
Revenue Management and Yield technique Expert

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What is revenue management?

Revenue management is a technique to increase sales or revenue by manipulating the price and made the product available for sale in relation to the demand and supply or current and forecasting demand. Revenue management involved in predicting consumer behavior by market segment, forecasting demand and optimizing price for several different types of products.

Officially we can say revenue management taken birth on 17 January 1997 when American Airlines launched it's "ultimate super saver" price for complete with their low-cost career PEOPLExpress.

Highly perishable service cannot be carry forward for the next sale, the value becomes zero of a certain period. Hotel rooms Airlines seats, cinema tickets car rental some of the examples of highly perishable services. Hotel management cannot carry forward their unsold room for tomorrows sale under any circumstances.

Revenue management and dynamic pricing(RMDP) proven technique of dynamically managing pricing, inventories and maximize the revenue when demand is uncertain. Revenue management technique is a widely accepted method through the application of RMDP, its may vary from industry to industry with the nature of business.

Revenue management is not an easy task nowadays because of the volatile market, high competition and lack of quality manpower, moreover revenue management becoming more strategic and Technology-driven. As revenue management developed, it's become more disciplined and Technical in using a variety of analytics to predict the consumer demand to optimize the revenue and price availability to maximize revenue.

Large hotel groups and airlines have sufficient resources, tools and techniques to optimize revenue. Small and standalone Hotel does not have a big budget to adopt the scientific method like RMDP and the declining occupancy become a challenge for them.

Online travel agent(OTA )plays an important role in revenue maximization for Hotel, Airlines, cruise ship, its increase their revenue by managing dynamic pricing and inventory. It can be called yield management. There are more than  40 OTA ( online Travel agent) and GDS (global distribution system) existing in the market. Booking.com go- MMT Cleartrip yatra.com Agoda, Expedia are some of the major players in the market.

Factor affects RMDP or Revenue management:

1. Segmentation

Divide the group of the customer with the same interest or behavior known as segmentation in revenue management. such as income group of 50000 to 60000 per month /80000 -900000 etc. Traditionally hotel segment h their guests according to the purpose of the visit.

2. Fixed and Variable cost

Fixed and variable cost is an important component to maximize revenue. In Revenue Management fixed cost is high compared to the variable cost. Less variable cost may add more revenue to overall profit.

3. Forecasting

Forecasting of demand is another important aspect of revenue management. Without an accurate forecast, better price and yield techniques cannot be applied. Understanding demand and supply is very important for an accurate forecast.

Four types of forecast are very important in revenue management:

1. Demand forecast

2. Financial forecast

3. Operational forecast

4. Strategic forecast

The forecast means demand(actual+ interested)= Forecast, in low s diamond" low price point" may maximize Occupancy din high forecast demand "high price point may  Maximize revenue.

4. Pricing

   Dynamic pricing help to increase the revenue to a large extent and help to make the market-wide.

5.Yield Technique:

By using r inventory control any price hotel can scale the revenue and maximize the profit. Management of price and inventory is known as a  yield technique.

Various yield technique:

1. The maximum length of stay

2. Minimum length of stay

3. Close to arrival

4. Allocation 

Research shows that early check-in and late check-out increase the revenue by 300%.

 

Why is revenue management important for the hotel:

 

Revenue Management and RMDP can be applied to all types of hotels; it may be big or small, stand-alone or Group Hotels. Research and studies by a consultancy company have shown a price increase of 1% (one percent) can generate revenue of 8 ( eight percent ) to 12%. (Twelve percent)

More than 1000 Hotel internationally using revenue management practices and one of the Indian Company increase revenue by more than 60% by using RMDP.

According to the wall street journal Revenue Management ( RMDP) in the N0 1 emerging business strategy.

Marriott International using revenue management system for the last 20 years and Development group pricing optimizer (GPO) and increase their revenue by $46 million in 2008.

Intercontinental hotel groups increase their revenue by 2.7  percent in the year  2009 by using revenue management.

Research shows that early check-in and late check-out increase the revenue by 300%.

If you want to increase  the revenue of your Hotel  by RMDP, Revenue  management, Yield technic, and better OTA management then you can contact Mr. Deepak on +91 7003038405

 

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Data Source: IIMA RMDP program, HOSPA Revenue management program course materials 

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