Advanced revenue management for hotels 1 - lisbon 2016 - english

Advanced
Revenue Management
for Hotels
Understanding all the
Indicators
Given by Tomeu Pons
14 Nov. 2016 - Lisbon

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Advanced Revenue Management
Introduction
The main objective of this seminar is to review and look in more
depth at the concepts that form the key pillars of revenue
management.
The participant must already understand the concepts of e-
distribution as well as the principles of revenue management.
Therefore, this seminar looks in more depth at each of the
elements so that the participant understands them and can use
them in their daily work in the hotel where revenue decisions
must be taken on the basis of data rather than instincts.

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Introduction
Professor: Tomeu Pons tomeupons@gmail.com
I am currently Associate Professor at Turisme Sant Ignasi
TSI - Esade Foundation (School of Tourism and Hospitality
Management Sant Ignasi). Responsible for Training in the
Tourism Department of Cibernarium – Barcelona Activa
and Associate Professor at the UB.
Qualifications in Hotel Management, Marketing,
Ecommerce and Systems from UIB Hotel School, Esade, La
Salle URL and UPC.
I work as BDM in Hotelerum and I have worked as
consultant, director of marketing and CEO in companies
such as Flamingo Hotelier, The Perfect Hotels, Sercotel,
Hotusa, SAP…

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Contents
• Introduction
• Basic Definitions
• Forecasting
• Benchmarking
• Segmentation
• Pricing
• Reports, Statistics
• New Tools
• Exercises
• Glossary
• Exam
• Reading

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Notice
This 2nd level seminar does not contain formulas, graphs or any
other type of applied calculation since it is necessary to be fully
clear about the thinking behind a formula before starting to use
it.
Many hoteliers apply incorrect formulas and calculations to their
revenue management strategy due to their limited knowledge of
the elements they contain.
These formulas and the excel sheets that support them are
explained in depth in the 3rd level course “Professional Revenue
Management”

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Basic Elements of RM
The elements required to carry out Revenue Management are:
• History – Statistics. Demand and Trend
• Forecasting – Predictions
• Benchmarking
• Segmentation
• Pricing - RM Pricing Policy
• General Strategy
• Price Management Systems and Tools
• Inventory Management

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When is it appropriate to apply yield?
To apply RM we need:
• fixed production of stock/products
• perishable product
• clear dynamic price setting policies
• ability to update rates quickly
• that bookings/purchases take place in a period of time
• possibility of segmenting markets or groups of customers
The involvement of the Management, Sales and Bookings teams is
necessary to manage RM actions. The RM vision, mission and objectives
must be unified.
It is necessary to collect information about demand: prices paid, booking
dates, consumption dates, amount of demand, events in the destination or
origin cities, prices of our competitors, distributors, etc.

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Main Techniques
The following are some of the main tools used in RM:
- Availability Management
- Room Allotments
- Groups
- Terms and Conditions for Bookings
- Automatic Room Allotment
- CTA, Close to Arrival
- MinLOS & MaxLOS
- Upselling
- Overbooking

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Key principles for price
The key point is to have appropriate prices and to define them
we will take into account:
- Value of our product
- Perception by the customer
- Positioning
- Competition

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Minimal influence of revenue
Several studies indicate that revenue management and
commercial management influence around 30% of a hotel's total
results.
The same studies indicate that 70% of the factors influencing the
result of a hotel depend directly on the economic environment of
the customer and the hotel.

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With what Aim
The key point

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Forecasting or Scheduling demand.
Forecasting, organizing our forecast.

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What is Forecasting
Forecasting is the estimation and analysis of future demand for a
specific product, component or service using inputs such as
historical sales ratios, marketing estimates and promotional
information.
Price Waterhouse Coopers

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Objectives of Forecasting
The objective is to predict the periods of low demand, to be able
to stimulate sales, and to identify the periods of high demand in
which we can raise prices.
It is about creating a study based on a schedule that allows us to
identify the demand that our product will have in the future.
It also meets other objectives of different departments such as:
purchases from suppliers, visitor flows, estimates for governance,
bar or reception staff, expenditure planning and other logistical
and operational aspects.
It helps with the general forecasting of the hotel's operating
results.

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Reasons for Forecasting
Why are forecasts produced?
• to measure demand
• to predict lack of demand
• to react to lack of demand
• to define the commercial strategy
• application of prices
• restriction of sales
• to discover cancellation patterns
• to control expenditure
• to control commissions
• financial planning
• hr planning

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Objective of Forecasting for a Revenue Manager
The main objective is to maximize income and for this we will
work on the following points:
• Predict high demand
• Predict low demand
• Application of rates
• Define reaction strategies
• Terms and conditions of sale
• Distribution of the room allocation
• How to stimulate sales
• How to raise prices
• Predict distribution costs or commissions
• Help marketing in buying advertising

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Minimum Data in Forecasting.
No matter how simple a forecast is, the minimum data that you
should consider are:
1. Occupancy
2. Average rate
3. Total income or by segment
4. RevPar
5. Pick up
6. Commissions

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Data in a Forecast.
The recommended data that you should consider are:
1. Occupied rooms
2. Average occupancy %
3. Rooms denied (demand)
4. Rooms rejected (overbooking)
5. No shows
6. Canceled
7. Current bookings
8. Bookings trend
9. Historical comparison
10. Average Room Rate (ARR)
11. Revenue per Available Room – RevPar
12. Market Penetration Index – MPI
13. Gross Margin Per Available Room – GOP
14. Total rev per av Room – TrevPAR
15. Duration of stay
16. Booking Pace – time between bookings and arrival

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Data in a Forecast.
The extra data that you should consider are:
1. Historical occupancy for each day (calendar, numerical, weekly)
2. Evolution of historical bookings for that day (what day they
were made)
3. Current bookings for that day
4. Current evolution of bookings for that day
5. Customers who shorten their stay
6. Customers who extend their stay
7. Customer supplier/distributor

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Advanced Data in the Forecast.
To produce a Complete Forecast (for the whole hotel) it is
necessary to know the historical data for consumption, referring
to:
• revenue from rooms
• F&B and other revenue
• weekday consumption
• consumption at events: fairs, festivities, etc.
• consumption in vacations
• segmented customer (business or leisure)
• changes in demand
If you can, do another on competitors and another on the
destination.
This document will allow you to know the number of arrivals and
departures, occupancy per room and possibly other hotel
revenue streams. It is a good tool for setting internal targets.

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Phases of a Forecast.
Phases of a Forecast:
1. Compilation of historical data
2. Compilation of current data
3. Introduction of data into the future calendar
4. Mapping adjustments for days or periods

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How to produce a Forecast.
We can produce the Forecast with two types of data:
- internal data (sales and commercial department)
- external data (reports and competitor data)
Both systems are correct.
The best Forecast comes from the combination of both types of
data.

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How to use the forecast in our daily work.
It is very helpful to use the forecast in our daily work.
Although it is only a “scientific” forecast it can tell us how our
sales level is doing (forecasts) and if we are moving away from
or towards our target, for both sales and income.
We can compare not only the bookings already obtained (on the
books) but also the demand for bookings that we have (on the
books or pick up XXXXXX).
That is, it allows us to react to the (demand curve) that has been
seen to obtain sales if we are not achieving the overall (level of
production) targets or those by segment or distributor.

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External Forecasting Parameters
External parameters for the hotel.
The economic environment of the hotel is important when
producing forecasts. We must use data from the micro
environment and the macro environment.
Parameters:
•Prices of competitor hotels
•Economic framework
•Growth of demand in the market
•Growth in supply logistics (flights)
•Complementary offer maturity
•Strategies of the local, national and international competition
•Public safety, fame, etc.
•Consumption habit of the customer

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Elements of the Analysis
We have three levels of analysis: daily, monthly and annual
Daily:
- Average occupancy
- Average rate
- Rev PAR
- Pick Up, for what day are the bookings made today
Monthly:
- Geographic Origin, GOB
- Length of Stay, LOS
- Lead Time
- Channel
- Commissions Paid
Always:
- Profitability of the customer type

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Other factors to Consider in the Forecast
Factor: Consumer Behavior
It is important to segment customers not only by nationality,
supplier, channel or distributor but also by pattern of behavior at
the time of the booking and during the stay.
Factors such as: choice of room type, reserved rate, payment
method, commission paid, consumption in the hotel, length of
stay, days at the hotel (national long weekend), level of service
required and customer satisfaction.

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Factor: Actual Demand
The actual demand or unconstrained demand is the real demand
for our hotel rooms including not only what we sell but also:
refusals, rejections, cancellations and no shows.
In some cases this figure can represent 3% of demand. And if we
do not have it, we tend to work with lower prices.
These data should be recorded in the PMS by the corresponding
departments.

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Factor: Segment, Key Accounts or Key Supplier
We must constantly review key accounts, segment and key
suppliers or distributors.
The decrease in one of these can cause serious losses for the
hotel and lead to a large workload for the sales team to replace
them or increase demand from other channels.
This work can only produce a good result if it is diagnosed early
enough to react.
They should represent 10% as a minimum and 30% as a
maximum.
It can also be carried out on: packages, products, events, nat.+
purchasing behavior, direct, reception, walkins, etc.

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Factor: Failures or Lack of Accuracy.
The following errors can be made in the forecast:
•Using inaccurate information
•Too few historical references
•Lack of matching of periods and dates
•Not having total demand
•Basing it only on internal data
•Basing it only on external data
•Counting group customers as individuals.
•Working with discontinued products or packages (no demand)
•Not knowing what promotions or strategies we had in previous
years
We must measure the quality of our forecast.

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Factor: Calculation of Errors in the Forecast
In the Forecast

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Diagram: Demand Curves. Automate your view from the PMS

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Diagram: Simple Demand Curves.

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Diagram: data we extract from the PMS
-Where do the bookings for a certain day come from
-What has been booked during a certain day.
We try to locate key revenue periods for that day

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Diagram: Example of Forecast 1

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How we measure our Factor Yield/RM
Revenue per Available Room
RevPAR
Income from rooms
or
Average Rate x Occupancy
Number of Available Rooms

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How we measure our Factor Yield/RM
Gross Operating Profit – GOP
Available rooms
Total Revenue
Available rooms
TRevPAr Total Revenue per Available Room
GOPPar
Gross Operating Profit per Available Room

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Vocabulary for Forecasting
Booking Pace
The Booking Pace for present and future days should be
monitored to ensure that it is performing in a way which means
we can meet the forecast, reacting to any deviation if it is not.
Daily Pick-up
The daily Pick-up, and the ability to follow the booking pace
should continue to distinguish between individuals and groups.
On the Books
The Booking Pace for present and future days should be
monitored to ensure that it is performing in a way which means
we can meet the forecast, reacting to any deviation if it is not.
Booking Window
The daily Pick-up, and the ability to follow the booking pace
should continue to distinguish between individuals and groups.

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Pick Up
The Pick Up is the figure that tells us today how many confirmed
sales we have for a day.
This figure shows us, by day or room type, the % already sold in
a very detailed way.
This figure will act as a guide in the decision to raise or maintain
prices for a day and that we must apply from today.
The ideal situation is to be able to analyze this figure and act
daily in all channels.
EXPLAIN THE 4 PREVIOUS WORDS

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Forecast Vs. The Reality of the Hotel
To make decisions in the face of...
1. Too many sales of a segment
2. Lack of bookings
3. Commercial actions or discounts
4. Correction capacity (time and auto room allocation)
5. Increase in commission expenses
6. Decline of a market
7. Marketing proposal of a distributor
8. Increase in prices
9. Decrease in prices
10. Decline or disappearance of segments
11. Change of consumer behavior; booking site
12. Change of maintaining the strategy

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When should I produce a forecast?
The frequency of the forecast must be established by each
company.
Continuous context of measurement and reaction (decisions by
business)
The normal frequency is:
- Weekly for the sales targets meeting
- Bi-weekly for the next 90 days
- Bi-weekly for special dates
- Monthly for season changes
- Quarterly for the rest of the year
- Quarterly for the next 12 months
- When we detect a deviation of 10% from the pms for a certain
date
- When we detect a deviation of 5% in a supplier, destination

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Constant Forecast.

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Collaborative Tool.
Use Google Calendar to identify all the events that can influence
consumption. This is an easier and more accessible tool for the
whole team.

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New Tools
The Externalized Forecast.
Use Google Calendar to identify all the events that can influence
consumption. This is an easier and more accessible tool for the
whole team.

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Elements in Forecasting
Remember:
- Targets met vs Targets set
- Bookings on the books
- Actual Pick up vs expected Pick up
- Segments expected
- Average rate
- Total revenue
We must carry out at least one Forecast:
- Once a week for the next 4 weeks
- Once a month for the next 3 months
- Once a month every 3 months for the whole year
- Once a year for the next year

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Benchmarking, selecting my competitors

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Benchmarking
This is a study of the competition that aims to find out how they
sell, at what price and what their occupancy is.
All of this with the aim of discovering how we can improve and
giving us clues on how to act with distributors, customers, etc. in
order to improve our marketing.
As a minimum a benchmark study should have data on:
• Prices
• Room type
• Products
• Packages
• Distribution channel
• Occupancy
• Services Offered

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One of the basic elements of revenue management is outlining
who our competitors are, and it should be the marketing or sales
department that advises us.
We must select our competitors, since they will serve as a
reference when identifying how a customer may perceive us.
The analysis of competitors is key to making progress in
strategies and results.

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The objective of benchmarking is to be able to compare
ourselves with the selection of competitors to identify:
-Their prices (public, private, FIT, etc.)
-Market shares
-Development of our sales
-Where they are distributed
-At what prices they sell
-From where customers arrive
-Occupancy rates
-Average price
-Opinions of their customers
-Deficiencies
-Segmentation
-Positioning in OTAs
-Strategies
-Extras offered and prices
-Promotion tools (marketing)
-Photographs
-Descriptions

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We propose a simple method: 15/9/6
We must select:
-5 establishments that the customer could consider to be
superior to our hotel, superior substitute product
-5 establishments that the customer could consider to be similar
to our hotel, similar substitute product
-5 establishments that the customer could consider to be inferior
to our hotel, inferior substitute product
Over time we will reduce the list to 9 but we will never have
fewer than 6
References: stars, zone, type of room, customers, etc.

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Benchmarking, the Competitive Set
We propose a simple method: 15/9/6
References: stars, zone, type of room, customers, etc.
This is our Competitive Set
5 3 2
5 3 2
5 3 2

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Benchmarking and Daily Prices
Monitoring the prices at which our competition sells is one of the
best tools to help us sell better. Using this we will be able to
reach numerous conclusions.
There are many tools on the market to obtain this information.
The data to extract will be:
• What is their strategy?
• Do they use yield?
• What occupancy they have?
• Can they affect our sales?
• What will their next price be?
• Selling with minimum stay (LOS)

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Benchmarking, IT Tools
We propose the use of comparison IT tools as they facilitate the
work, automating it.
Companies such as: Rateshopper, STR Global, Dueto, Pricematch,

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Companies such as: Rateshopper, STR Global, Dueto, Pricematch,

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Companies such as: Rateshopper, STR Global, Duetto, Pricematch

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Benchmarking, Reference Variables
a) Market share: total hotel rooms/total market rooms x 100
b) Current market share: total hotel rooms sold/total market rooms sold x 100
c) Penetration index: current market share/ market share
d) Average price index: average hotel price/ average price all hotels
e) Income generation index: ipm x imp

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Market/Customer Segmentation.
Market segmentation

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Market segmentation is a study that should allow us to know the
different reasons why customers come to our hotel.
This should allow us to form different segments or homogeneous
groups of customers based on the reasons for the visit.
On knowing these reasons we will be able to analyze how to
increase the demand of these segments.
We must also know the segments of our competitors and the
destination in general to compare these.
A single customer can be in several segments.

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To consider a group of customers as a segment it must comply
with the following:
1. It is not a channel or distributor
2. Sensitive, responds differently to the strategy
3. Measurable, both in themselves (age) and in the result
(consumption)
4. Operable, can be worked on (mtkg, prices, etc.)
5. Profitable, Segment or micro segment but not too small
It always responds to the marketing mix.

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9 Benefits of Segmentation.
1. It increases income by segment
2. It allows the selection of more profitable customers
3. It saves on the marketing budget
4. It improves marketing actions
5. It allows different prices to be offered
6. It allows different services to be designed (package)
7. It allows our services to be adjusted
8. It generates a customer who is more satisfied
9. It has an impact on the customer environment

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Segmentation Stages:
1. Identify the group of customers, dimension
2. Determine their needs and expectations
3. Ability we have to generate demand
4. Internal changes to promote this demand
5. Analysis of the historical report and consistent forecast

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To study market and customer segmentation we should collect
this data:
• Schedule of their demand
• Length of stay
• Purpose of stay (inbound and outbound)
• Reason for choice of hotel
• Time in advance
• Revenue per room
• Revenue per customer
• Distributor through which they book
• Place of purchase
• Final product they consume
• Frequency of purchase
• Profitability
• Group size

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Revenue per Available Customer Value. Rev.PACV
These are the revenues we obtain by customer type, which
allows us to classify them and assign them a value.
Grouping them will allow us to be more effective when it
comes to optimizing our revenue as we will focus on those
that offer us more revenue at any time.
Top Revenue Client.
It allows the calculation of your “Displacement”, opportunity
cost of having one customer and displacing (rejecting)
another.
Very applicable for selecting series, groups and TOs.
Occupancy ceiling by group or TO.

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Exercise:
- Identify my segments
- Identify the segments of my competitors
- Identify the segments of my destination

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Official Definition
Pricing

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Impact of Pricing
Impact of Pricing on our Hotel
The importance of pricing is crucial for companies.
In 2009 a European study by Simon-Kucher showed that price
setting is crucial for the company and reported more benefits
than from cost reduction.
We can ask ourselves, what importance does our general
management place on cost reduction? How many programs are
implemented in this area?
And about pricing, how much attention is it given? Who imposes
it on us? How do we work with it?

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Official Definition
What is Pricing
These are the pricing setting techniques developed within a
company. This price setting can vary depending on the
company’s strategy.
The main price setting factors are: manufacturing costs, market,
competition, market position and quality of the product.

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Access to more customers
Pricing or how to multiply access to products and customers.
The focus for the pricing objective must be global and strategic.
The pricing objective in the hotel sector is not only to make
changes according to market demand.
The main objective is to create a range of products that can be
absorbed by as many customers as possible to generate the
greatest possible revenue.

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Efficient Price
Price management triangle:
Costs
Competition Demand
Management
of Prices

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Efficient Price
Efficient Price:
These are price setting techniques for a good or service.
Setting prices can be approached from the point of view of either
production cost or demand.
From the marketing point of view, an 'efficient price' is a price
that is very close to the maximum price that a consumer is
willing to pay.
In economic terms, it is a price that transfers most of the value
obtained by the consumer to the producer.

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Pricing. Where do prices come from?
From the mind of the customer. From what the customer is
willing to pay for a good or service. The customer compares
different options (substitute products) together with their
available budget and the return or pleasure they obtain.
That creates the idea in their minds of the appropriate price they
would pay for a good.
To increase its profitability per sale a company must always know
the maximum price range at which its customer is willing to
consume.
To increase the customer's perception of value, factors such as
the product, price, distribution and how we promote it must be
taken into account.

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Pricing. Where do prices come from?

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The Customer's Price and Response
Having a good price but not having customers.
Although price seems to be a tool over which we have control
this feeling is totally false.
- Price is defined by demand
- Sometimes it goes up and sometimes it goes down
- Seasons of high demand and low demand
- Years without demand
- Channels without demand
Price is also defined by the competition (local or international).
There are techniques or factors that help increase the price

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Official Definition
Pricing
Next step: “scientific pricing”.
A mix of software, human behavior tracking, statistics and
scientific models to obtain a price for each customer.
It is based on the idea that: the hotel can discriminate between
different sellers and the seller can discriminate between different
buyers.
Why is the data collected by Google or Facebook so important?

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Official Definition
Financial Pricing
There are several financial or accounting techniques for setting
prices, all excellent, but none of them are based on market
factors so they are not useful to the revenue department.
They are only useful for establishing what prices we should sell at
given the investment made in the hotel.
We will not discuss any of these techniques in this seminar.

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Official Definition
Main methods for setting prices depending on the:
Market.
•Prices based on demand (elasticity/inelasticity)
•On the life of the customer
•On the value perceived by the customer
•Depending on the competition (high, penetration, market)
Costs.
•Costs of the intermediaries
•Prices based on direct costs
Perception of the customer
•% of one room type to another
•Reaction to the product
•Private prices/loyalty

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Official Definition
Pricing
Other factors for price setting are:
Quality of hotel services (and how we explain it)
Room quality (position, views)
Desirability, exclusivity factor
Geography
Demand
Season
Customer type
Available budget
Competitors
Offer in the area

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Official Definition
Prices and results.
There are 3 approaches to measuring the effectiveness of prices
by their results. How do we want to measure it in our hotel?
-Based on the average rate
-Based on % occupancy
-Based on RevPar
We must analyze the prices that we sell most by:
-Channel
-Season
-By rates/offer

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Official Definition
Price Discrimination.
These are the parameters by which a company assigns prices.
1. Perfect discrimination. This is the most effective system in
tourism, it assigns a price to each customer and each product. It
assesses the intensity of demand and evaluates the type of
customer.
Applied in the extreme, the price would vary depending on the
unit we sell and who it is sold to.
Other discrimination options:
2. Volume. By purchase volume/quantity (including by what they
consume in the hotel)
3. Type. By customer type/group, or by version
By positioning, image, flash promo, seasonal, etc.

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Official Definition
Pricing and Rate Obscuring
This is one of the techniques to deal with a serious fall in demand
such as a crisis or collapse of an outbound agency.
Offers are the best response followed by masking:
• Make packages
• Free nights for every x of stay
• Opaque channels, priceline type
• Free breakfast
• Prepaid
• Transport
• Excursions

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Tariff Structure
Pricing
We can base our tariff structure on:
1. Official
2. Rack
3. Walk-in
4. Negotiated
5. Corporate
6. Wholesalers
7. Fit
8. Promo
9. Mice - meetings incentives congress and events
10. Weekend
11. Bar
12. Last m.
13. Long Stay
14. Loyalty
15. VIPs

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Price matrix
Standard
Superior
RACK PREF BAR1 BAR2 BAR3 BAR4 BAR5 BAR6 WKD1 WKD2
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
General Price Table

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Dynamic Pricing
Advantages of Dynamic Pricing
- Eliminates discounts in periods of high demand
- Reduces room availability for groups
- Increases discounts in periods of low demand
- Sets rates for "Special Events" or for periods of extraordinarily
high demand.

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Actual Effects on Hotels
* Avoids cannibalism
Price
Mix of Rates
No. of Rooms

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Revenue Algorithm. Example
Display Prices of:
1. 0% €116.0
2. 20% €122.4
3. 40% €128.8
4. 60% €135.2
5. 80% €141.6
6. 100% €148.0

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Practice: How we set our prices

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Price matrix
Standard
Superior
RACK PREF BAR1. BAR2. BAR3. BAR4. BAR5. BAR6. WKD1. WKD2.
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
General Price Table

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Price matrix
Standard
Superior
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
25%50%75%100% 33%66%99%
Very Low Season Price Table

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Price matrix
Standard
Superior
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
25%50%75%100%
Low Season Price Table

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Price matrix
Standard
Superior
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
33%66%99%
Shoulder Season Price Table

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Price matrix
Standard
Superior
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
25%50%75%100%
Shoulder-High Season Price Table

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Price matrix
Standard
Superior
200 160 140 120 110 100 90 80 70 60
215 175 155 135 125 115 105 95 85 75
Suite 230 190 170 150 140 130 120 110 100 90
25%50%75%100%
High Season Price Table

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A hotel with 200 rooms. If RM is applied to the sales of each of
its rooms and each room has an increase per sale of €2, the
result at the end of the year is very significant.
200 rooms x €2 = €400/day x 365 days = €146,000
200 rooms x €3 = €600/day x 365 days = €219,000
200 rooms x €5 = €1000/day x 365 days = €365,000
200 rooms x €15 = €3000/day x 365 days = €1,095,000

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1 Hotel x 100 Roomsx365 days = 36,500 Rooms 1/3 =
12,166 Rooms
12,166 x €3 = €36,498
12,166 x €6 = €72,996
12,166 x €9 = €109,494
ANNUAL TOTAL EXTRA = €218,988

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Official Definition
Price parity

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Price Parity
The price parity model is strongly criticized by some but also
advocated by others.
Despite having no financial logic this practice is widely used
today and is the only one accepted by all the IDS.
Internally, there are differences between the commissions
charged that are taken as promotional or marketing expenses.
Some IDS are offset with others.
Without parity, customers would go en masse to buy through the
cheapest IDS and although this would be more effective it would
cause a single IDS to dominate almost all of the hotel's sales; a
very dangerous situation.

98
Commercial Parity
Commercial parity is based on the comercial parameters that can
condition the purchase by the customer.
It is important to have commercial parity with our distributors as
this can give them advantages over our own channel.
- Payment conditions
- Booking conditions
- Cancellation fees
- Days of cancellation
- Cleaning costs
- Hidden offers
- ...

99
Control your Price Parity
Control of our parity is very important and can mark the
relationship with our customers and distributors.
There are technological tools to compare the prices for our hotel.
- know who we are working with
- know who distributes us
- know the “mark up” on our product
- understand the model of our distributor: Retail, Merchant, Opaque

100
Parity Disrupters
Dumping
Some companies carry out “Parity Disruption” measures on a
completely voluntary basis.
It is about breaking the parity of your hotel to benefit them,
reducing their own sales margin so that the customer chooses to
make the purchase in their companies.
Other times they integrate data from several of your channels
and show the one with which you have a lower price contract.
These companies usually don’t have a direct contract with the
hotel and use price comparators to reach the customer.
If necessary, make bookings on each channel until you get the
rate/voucher and know through which agency you are being sold.

101
Official Definition
Pricing and Distributors

102
Capacity and its management.

103
Availability Management
The correct management of our availability is one of the biggest
points of support for proper RM.
Factors that condition our availability:
- Booking conditions
- Rate level
- Non-Guaranteed Bookings
- Prepayments
- Room Allotments
- Groups
- Overbooking
- Waiting list
- Peaks and Troughs in planning

104
Capacity/Availability Management
Actions on capacity:
- Nesting (sell the superior ones at prices of doubles)
- Room Allocation Protection (Closures + wait)
- Auto room allocation bookings
- Closures in network of distributors
- No action on capacity (whoever comes takes it)
- Static versus dynamic room allocations
- Capacity by customer value (capacity x cookie)
- …

105
Overbooking

106
Overbooking
Overbooking is a tool for the management (increase) of capacity.
It is a consequence of the deliberate sale of a larger number of
beds than exists in order to offset cancellations and no shows.
Often no shows, last-minute cancellations and customers who
decide to cut short their stay can affect our income and possibly
our profitability.
RM is a tool that allows us to find the optimal level of sales to
make the most of the availability of our hotel.

107
Overbooking
Action Plan
As a result of this, it is advisable to have an action plan for these
occasions. In this we set out our planning:
•where deviations will occur
•stay costs
•transport costs
•compensation in services
•monetary compensation
•possible sanctions

108
Overbooking
Calculate your level of Overbooking and Assess Risk versus Profit
Bookings Made > > Arrivals
Unguaranteed
Cancellations
No Shows
Rates We Charge
Deviations we pay

109
Day to day tools

110
Remember:

111
Exercise
Establish the strategies and objectives of your hotel.
•Who we want to attract
•At what prices
•How may products we offer them
•What services we will provide
•At what prices per segment
•How you differentiate your hotel from the competition
•What days make up each season
•What factors will make us vary prices
•Increase profitability
•Increase repetition

112
Exercise
Establish your hotel's positioning.
•The one that most interests your most profitable customers
•What services you offer
•What prices we set for the rooms
•What prices we set for extra services
•What changes you make to your image and descriptions
•Which distributors we use
•How much money they generate for us
•What cost per sale we have
•What is the total amount of commission paid
•Who generates all the demand I need

113
Exercise
Make your budget.
•Day to day budget
•By segment
•By type of room sold
•Channels
•Nationalities
•Segments
•By distributor/supplier
•Large accounts (group and TO)
Complications on extracting information from the PMS and
formats.

114
Exam
Questions
1. When should an offer be activated?
2. Where do they come from?

115
Summary: Concepts of Revenue Management
Free Download:
http://www.duettoresearch.com/resources/Effe
ctive-Revenue-Management-in-the-Hospitality-
Industry-Report.pdf
http://www.duettoresearch.com/resources/Rev
Mgmt%20to%20RevStrategy.pdf
http://www.hospitalityupgrade.com/_magazine/
MagazineArticles/Running-Shoes-Bears-and-
Revenue-Strategy.asp

116
Summary: Concepts of Revenue Management
Free Download:
http://www.adhp.org/pdf/1-theBasicsofRM.pdf
http://revenueanalytics.com/pdf/Cornell%20Fe
bruary%202009.pdf
http://cqx.sagepub.com/
http://www.hammerman.com/files/occtrack/fore
casting.pdf
http://www.hsmai.org/members/SIGRevManag
ement.cfm

117
Recommended Reading

118
Professor: Tomeu Pons
tomeupons@gmail.com
LinkedIn: http://es.linkedin.com/in/tomeupons
@tomeu_pons
Thank you for attending.

119
Document made under Creative Commons & Copyleft license.
Use this content at your convenience. Link this document.
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Advanced revenue management for hotels 1 - lisbon 2016 - english

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