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Category: Revenue Management Wiki
Displacement cost refers to the revenue potential lost, or displaced, to the enterprise incurred by accepting one piece of business over a competing opportunity. When a hotel accepts a group, it may have to refuse some volume of non-group business as a result. The revenue from that non-group business is therefore displaced, but the question […]
Advanced Method Forecast or Linear Method
FC (Advanced) = OTB + PU (exp.) PU (exp.) = Average PU per day * d (remaining)
Historic Method Forecast
FC (historic) = (RN(Y-1) + RN(Y-2) + RN(Y-3) / numbers (n)
Combined Method Forecast
Pick up last year (PULY) FC = OTB + PU (Last Year) % Deviation (versus OTB LY) FC = Act (LY) * DEV (LY%) DEV (LY%) = OTB / OTB (LY)
Business on the Books (OTB)
OTB = On The Books; BOB = Business On Books The most common acronyms, both used interchangeably, for reservations and overnight stays already booked. You should find this information in your Property Management System (PMS). Rooms sold «my hotel» : RN or Revenue = OTB
At a hotel, the time taken between when a customer makes a reservation and their actual arrival is called the Lead Time. Sometimes this time period has to be restricted. Date of arrival – Date of reservation
Revenue Market Share (RMS)
Revenue market share is the percentage of revenue one hotel makes as compared to the overall competitive market. It is calculated by taking your hotels revenue and dividing that by the total market revenue. Revenue «my hotel» : revenue «market» (incl. my hotel) x 100 = AMS
Actual Market Share (AMS)
Actual market share is the percentage of your hotels number of rooms sold compared to the overall competitive market. It is calculated by taking your hotel room nights sold and dividing that by the total market room nights sold. Number of rooms sold «my hotel» : number of rooms sold «market» (incl. my hotel) x […]
Fair Market Share (FMS)
Fair Market Share is an indication that a hotel’s overall performance stacks up against its immediate competitors. Number of rooms «my hotel» : number of rooms «market» (incl. my hotel) x 100 = FMS
Break Even Point (BEP) – In Unit and Revenue
Break Even Point (BEP) / Room Nights (RN) The break–even point (BEP) or break–even level represents the sales amount—in either unit (quantity) or revenue (sales) terms—that is required to cover total costs, consisting of both fixed and variable costs to the company. Total profit at the break–even point is zero. marginal return = ADR – Variable costs BEP RN = Fix […]
Wholesale – Transient Sub-segment
A discounted room rate packaged with outside travel and/or car prior to being sold to the guest. The rate is not visible to the guest.
A pricing philosophy where the seller considers both current market conditions and impartial customer perceptions to determine what the buyer would be willing to pay.
The level of demand that exists for a product without reference to the price levels and staycontrols that the seller might implement to constrain it. Unconstrained Demand = Constrained demand + Denials + Regrets
Transient – Market Segment
Transient guests are one of the major market segments an consist of individuals or groups that are occupying less than 10 rooms per night. Generally, they are walk-in guests, last minute or bookers or simply people that require a very short term stay in your facility. They require very little in terms of services and […]
Tour group/Wholesalers – Group Sub-segment
A negotiated rate for a block of rooms associated with tour operators/wholesalers who package together travel components and sell them as escorted tour group, escorted tour series or inbound ad hoc group.
A set of criteria utilized to filter potential bookings in order to maximize profitability when demand exceeds supply. They include MS#, MX#, CTA, and BTC. Also known as capacity controls.
SMERF – Group Sub-segment
A negotiated rate for a block of rooms associated with organizations that fall into the categories of Social, Military, Educational, Religious, Fraternal.
A product of liner programming, the shadow price is the marginal revenue the hotel would receive if it were to increase its capacity on that date by one room – the minimum acceptable revenue for a unit of capacity. It is zero if the hotel is not expected to sell out.
A portion of a hotel’s inventory of rooms set aside for a particular period of time for a client. Room blocks are commonly reserved for conventions and meetings. A room block is usually under a firm agreement (non-yieldable) and is for a set period of time.
Revenue per Available Room (RevPAR)
Revenue Per Available Room (RevPAR) is perhaps the most reliable and common measure of success for a hotel. As opposed to ADR, RevPAR takes into account your occupancy rate. For example if using ADR as a measure of success, you could simply sell one room a year at $1000 and your ADR would remain $1000 […]
Revenue Management is often defined as selling the right product, at the right time, to the right person, at the right price. But that sounds a little easier said than done. So in general, you can think of revenue management as a set of goals and tactics that aim to result in an increase in […]
Revenue Generation Index (RGI, RevPAR Index)
Revenue Generation Index (RGI) is a means of measuring your hotels performance and occupancy rate against that of your market competitors. Generally speaking, it ensure you’re receiving a good share of the market revenue in relation to your competitors. RGI = Your RevPAR ÷ Your competitors RevPar As with everything to do with a competitive […]
Return on Investment (ROI)
An metric to evaluate the quality of an investment, calculation: The owner’s investment return divided by the owner’s original investment.
Retail – Transient Sub-segment
A market positioned, seasonally priced room rate for transient business. It is a non-discounted, non-qualified rate that is always available when the hotel has rooms to sell.
Potential reservations for which the hotel has the product or service available, but the customer chooses not to buy based upon price or some other factor.
A rate strategy which offers the same rate with the same conditions for a particular room type in all distribution channels.
Logical, rational rules or restrictions that are designed to allow customers to segment themselves into appropriate rate categories based on their needs, behavior, or willingness to pay.
Qualified – Transient Sub-segment
A rate that requires the customer to be associated with a particular organization or to have a specific affiliation in order to book. Identification is required upon check-in. Examples include Senior Citizen, AAA, Government, Employee Rate.
Revenue minus expenses.
A forecast based on the current ROH (or ROH plus unconstrained demand) plus the projected pick-up, based on booking curve trends.
The number of requests or reservations received between two dates, often “today” and the arrival date (DBA -1).
Services that cannot be produced and stockpiled (inventoried) before consumption: they exist only at the time of their production.
The practice of selling more rooms than the total hotel capacity to offset the inevitable event that scheduled guests do not arrive, in order to still maximize occupancy.
A forecast developed based on projected arrivals and length of stay. Also known as a Demand/Arrival Forecast.
A metric indicating the percentage of utilization of hotel rooms. Calculation: occupied rooms divided by available rooms.
Those rates which, due to existing agreements already in place, are not subject to change when a property revenue strategy changes.
Negotiated – Transient Sub-segment
A rate negotiated with special (typically corporate) accounts. Identification with a particular company or organization is required to obtain this rate.
The impact that multiple night stays and ancilary revenues have on magnifying Revenue Management decisions.
Minimum length of stay
Imposes a strict limit on the minimum number of nights in order for a potential reservation to be accepted for a given arrival date.
Maximum length of stay
Imposes a strict limit on the maximum number of nights in order for a potential reservation to be accepted for a given arrival date.