Pearson New International Edition International pcl tp indd 1

REVENUE MANAGEMENT
SECTION REVIEW AND DISCUSSION QUESTIONS
Section Objective:
Explain the revenue manager’s role in establishing room rates
by applying information about rate types and rate determination factors and by
considering traditional and Web-based pricing strategies.
Section Summary:
The primary role of the revenue manager is to maximize
RevPar. Many complex factors must be considered in efforts to do so. Discounts
from rack rate may be allowed on specific dates or as the number of room nights
increases according to the laws of supply and demand. Discounts may also be
offered to members of specific groups, government and military staff members,
and to the clergy and selected other guests.
Large properties typically have a full-time revenue manager with a staff to do
all of the work that is required. In smaller properties, revenue management duties
may be assumed by the FOM or the DOSM, or both. In still smaller properties, the
general manager likely assumes the role of revenue manager.
The typical hotel has many types of rooms, all of which may have different rack
rates and rates that vary based on discounting structure. Some traditional approaches
to determining rates still have conceptual impact. For example, the Hubbart formula
seeks to determine what a hotel’s ADR should be to reach financial goals, and a more
simple rule of thumb suggests charging $1 in ADR for every $1,000 invested in a hotel.
However, consumers and hotel competitors now have real-time web access to rates
being charged by a hotel and its competitors for current and future dates. The
dynamics of rate making have changed, and the laws of supply and demand tend to
be more important than traditional considerations of operating costs.