Pearson New International Edition International pcl tp indd 1

REVENUE MANAGEMENT
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not. Recall that the goal of a revenue manager is to increase RevPar not only on a
daily basis but over the long term as well. Offending loyal guests by incompetently
managing yield benefits neither the guests nor the hotel.
A PMS can assist hoteliers with yield management decision making, but the sys-
tem must be programmed in harmony with the yield philosophy of the revenue man-
ager. To see the importance of different yield management strategies, consider the
Altoona Hotel’s data and the data of two other hotels with which it competes. Each
of the hotels has 300 rooms, and the RevPar calculations for last night are shown in
Figure 16.
Note that each hotel achieved a RevPar of $75. Recall from our earlier discussion
of RevPar that each of these hotels would, therefore, have identical RevPar indexes
on their respective STR trend reports. Yield management of these hotels, however, is
being conducted in very different ways. The low-priced competitor (ADR 
$100)
obviously values occupancy rate over ADR; it has the highest occupancy rate (75 per-
cent). This may be an effective strategy if, for example, the total revenue from all
sources (including food and beverage sales, telephones charges and pay-per-view
movies) generated by this large number of guests helps to offset the hotel’s lower
ADR. The high-priced competitor (ADR 
$187.50) has the lowest occupancy rate
(40 percent). This hotel will likely find operating costs reduced (fewer rooms to
clean) and may be able to offer superior service levels (because the total number of
guests to be served is smaller), which helps to justify the hotel’s higher rate. The
Altoona Hotel’s strategy falls between those two extremes.
Despite individual differences in philosophic approach, most revenue managers
would accept these principles:
•
Occupancy and ADR indexes should be close. Ideally, the occupancy index and
ADR index should be close; that is, percentages should be within a few per-
centage points of each other. If the occupancy index is well over 100 percent
(110 percent or more), the hotel should attempt to increase its ADR but also
be prepared to lose some occupancy index points. If the occupancy index is well
below 90 percent, the hotel should consider a reduction of selected rates.
•
Rate integrity is essential. Pricing on e-distribution channels as well as on in-
house channels of distribution should be coordinated to ensure that decisions
are made for the hotel’s long-term benefit.
•
Revenue management is a daily activity. Room demand should be monitored
daily (or hourly). To keep current with market demand, some revenue managers
monitor competitors’ e-channel room rates daily. In addition, many revenue
managers anonymously phone their competitors every day to inquire about
walk-in rates.