Hotel management front office operations questions. It needs to be at least 500 words. Chapter 13 The goal of revenue management is to provide a more precise measure of room revenue and occupancy performance than other historical benchmarks through combining average daily rate (ADR) and occupancy percentage into one statistic called yield statistic. In essence, revenue management is a technique for maximizing revenues.
2. Communication between the various revenue centers is important to the successful implementation of revenue management because it leads to accurate forecasts that enable all departments to plan ahead.
3. The importance of using historical data when planning revenue management strategies is that it can help anticipate revenue trends through producing booking pace estimations. The limitations of using historical data are that it can be complex to apply because real life is full of unexpected fluctuations, such as a one-time, city-wide convention, and it is not easy to understand and manage the factors that affect changing demand rates.
4. The impact of closing discount rates when business is down is to prevent loss in occupancy and to raise average rate.
5. Booking pace is the rate at which group business is being booked. The role of booking pace in revenue management is to be an important forecasting variable.
6. Wash factor is the deletion of unnecessary group rooms from a room block. It affects revenue management by releasing excess rooms for the group block and maximizing revenues.
7. Transient displacement analysis is so important to determining whether to accept a group reservation because it helps the hotel decide the balance between accepting group reservations and rejecting them to accept more transient guests.
8. The difference between marginal and fixed cost is that marginal cost refers to the added costs of selling a product that happens only when the room is sold, or the cost per occupied room, while fixed cost remains constant even as sales volume varies.
9. The equivalent occupancy equation considers the marginal cost which the identical yield equation does not. The difference is significant because it helps the management know what other combinations of room rates and occupancy percentages provide equivalent net revenue. Both equations do not address the question however of when the hotel is breaking even.
10. A group reservation should be accepted on the basis of its effect on room revenue because it justifies the level of group reservation that hotels can take. Group reservations are usually lower in room rates, while transient rates are more expensive, so the management must know how many group reservations it can accommodate without displacing profitable transient guests.
11. Several tactics that may be appropriate when room demand is low are: (1) designing a flexible rate system that allows sales agents to offer lower rates at some conditions. (2) ensuring that all Internet distribution channels have current rates and availability rates. (3) monitoring group bookings and transient. and (5) opening lower rate categories. When room demand is high, some business tactics are: (1) closing restricting discounts. (2) reducing room group allocations. (3) considering establishing a minimum number of nights per stay. (4) reducing or eliminating 6 P.M holds. and (5) considering a rate raise for packages.
12. The hurdle rate is the lowest acceptable room rate. It is used in revenue management as the benchmark where room rates are sold above it. Availability strategies that are used as part of revenue management are applied through rate and stay restrictions, such as through discount allocation and duration control.