Revenue
The Number One Article on Revenue Jobs
by XPRESS,
05 December 2012
Revenue Management has become a somewhat controversial buzzword in our industry. As with many common terms, revenue management appears to have various definitions depending on the business and to whom you ask. The majority of us working in either the Hotel or Airline industries will understand the term Revenue Management and since its inception over thirty years ago it is now widely used, and has become a successful management tool.
The majority of us understand the basics of Revenue Management, however this article will highlight facts about Revenue jobs and where they add success to a business.
The Airline industry pioneered revenue management and was born out of the need to fill a minimum number of seats without selling all at a discounted price. The idea was to sell enough to cover operating expenses, once this was covered they could then increase the remaining seat price maximising revenue and off course profits.
Hotels quickly adopted this as naturally it fits these criteria extremely well. Hotels have a fixed number of rooms to sell on a daily basis and revenue management will help limit the hotel rooms that perish every day.
It is especially relevant in cases where fixed costs are high compared to variable costs. The less variable costs there are, the more added revenue will contribute to the overall profit. This makes it an exceptional tool for the Hotel industry as well.
Revenue management is applied within hotels by first starting with market segmentation; what type of business can your hotel serve. This is based around market conditions, room supply versus demand. What rates are marketable for each segment of the business?
Forecasting has always been difficult; however it is more challenging today than ever. Operations must continually change to keep revenue flowing, but changes should be kept realistic. An inflated forecast may lead to less than optimal pricing, market segmentation and its distribution. It may also lead to over staffing and over ordering!
Pricing in the current market can tempt managers into the default position of dropping prices to increase growth. A downward spiral helps nobody and recovery can take a long time. There are valid points in the argument to hold rate and if there is downward pressure on your rate then now is the time to analyze the price shift in your market place. You need to fully understand your rate index versus your occupancy rate.
Revenue Management has become a somewhat controversial buzzword in our industry. As with many common terms, revenue management appears to have various definitions depending on the business and to whom you ask. The majority of us working in either the Hotel or Airline industries will understand the term Revenue Management and since its inception over thirty years ago it is now widely used, and has become a successful management tool.
The majority of us understand the basics of Revenue Management, however this article will highlight facts about Revenue jobs and where they add success to a business. The Airline industry pioneered revenue management and was born out of the need to fill a minimum number of seats without selling all at a discounted price. The idea was to sell enough to cover operating expenses, once this was covered they could then increase the remaining seat price maximising revenue and off course profits.
Hotels quickly adopted this as naturally it fits these criteria extremely well. Hotels have a fixed number of rooms to sell on a daily basis and revenue management will help limit the hotel rooms that perish every day.
It is especially relevant in cases where fixed costs are high compared to variable costs. The less variable costs there are, the more added revenue will contribute to the overall profit. This makes it an exceptional tool for the Hotel industry as well.
Revenue management is applied within hotels by first starting with market segmentation; what type of business can your hotel serve. This is based around market conditions, room supply versus demand. What rates are marketable for each segment of the business?
Forecasting has always been difficult; however it is more challenging today than ever. Operations must continually change to keep revenue flowing, but changes should be kept realistic. An inflated forecast may lead to less than optimal pricing, market segmentation and its distribution. It may also lead to over staffing and over ordering!
Pricing in the current market can tempt managers into the default position of dropping prices to increase growth. A downward spiral helps nobody and recovery can take a long time. There are valid points in the argument to hold rate and if there is downward pressure on your rate then now is the time to analyze the price shift in your market place. You need to fully understand your rate index versus your occupancy rate.