Revenue Management In Hotel Industry Essay

1171 words - 5 pages

Introduction
Today the use of revenue management is dramatically changed for the past few decades. As revenue management shows its importance in the industry, revenue managers now have more strategic roles than just analyzing and applying opening and closing rates and forecasting them for the next weeks and months. They are now responsible for controlling revenue from other income generating assets at the hotel. They also became closely associated with marketing colleagues and interact with competitors as well as predicting the actions of competitors. Taking all these changes RM evolves much faster as the role.
What is revenue management?
“Revenue management or RM is the process or quinces of actions that allows you to sell the right product to the right customer at the right time for the right price thereby maximizing revenue from a company's products.” (Cross, 1998).
In other words RM is an essential instrument for matching supply and demand by dividing customers into different segments based on their purchase ability and allocating capacity to the different segments in a way that maximizes a particular firm’s revenues (Ivanov, 2012)
Today all the hotel chains and small privately owned hotels have their own revenue plan for a year, 5 years and, in some cases, up to 20 years. Hospitality industry is one of the fastest changing industries; as it’s always have to match the requirements of each client and industry standards. Revenue managers have to deal with new standards of costumer service and high level of competition.

History of revenue management
Revenue management is relatively young discipline. It’s history starting in early 80’s when airline industry start to use revenue management practice after government deregulation. As a revenue management a yield management become common all over airline industry during that time. “Date of inception of revenue management considered date of January 17, 1985 when American Airlines launched their Ultimate Super Saver fares in an effort to compete with the low cost carrier PeopleExpress.“( Salerno, 2014)
The idea of revenue management of that time was to fill a minimum amount of airplane seats without selling them at discount prices; The main goal was to sell enough seats to cover fixed operating expenses (plain crew salary, gas, amortization, etc.).
At the moment when fixed operating expenses were covered and air plain has few remaining seats to sell, the company than could sell those seats with the higher rate to maximize revenue and profits. (Salerno, 2014)

Revenue management tendencies
“Comparing with other industries, there are only three main conditions apply in revenue management:
1. There are fixed amount of resources, which are available for sale.
2. All resources are perishable. In other words there is a time limit to selling the resources, after which they stop to be value.
3. Different customers are willing to pay a different price for using the same amount of resources. “(Solerno,...

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