Revenue Management is a technique to optimize the revenue earned from a fixed, perishable resource. The challenge is to sell the right resources to the right customer at the right time.
Revenue Management implements the basic principles of supply and demand economics in a tactical way to generate incremental revenues.
Revenue Management is of especially high relevance in cases where the constant costs are relatively high compared to the variable costs. The less variable cost there are, the more the additional revenue earned will contribute to the overall profit.
Hotels should identify the type of customers and the price they are willing to pay for utilising the service. This can be done on the basis of the following parameters:
|Characteristic||High price||Low Price|
|View||Pool View, Ocean View, Hill View||Non Scenic View|
|Size||Bigger rooms with more facilities||Small Rooms with few facilities|
|Temporal||Week Day Bookings||Weekend Booking|
|High Season||Low Season|
|Length of Stay||Short Stay. One or Two Days||Longer Stay|
|Time of Purchase||Bookings made very close to check in date.||Booking made quite early to check in date.|
|Flexibility||Cancellation and rescheduling are allowed at no or low penalty||High penalty for cancellation or schedule change|
|Privileges||Are rewarded loyalty privileges||No privileges|
|Size of Business Provided||Self-funding vacationers booking rarely||Corporate business customer booking frequently|
|Point of Sale||At Hotel Front Desk or Physical delivery||Online, phone or email|