Analyse The Evolution And Function Of Revenue Management: Explanation Of Occupancy, ADR And RevPar

Revenue Management Process

While analysing in the hospitality sector, the occupancy indicates the number of rooms that are occupied by the customers (Sturman, Corgel & Verma, 2011). The performance of hotel is found by checking the percentage of available rooms and the beds that are booked. It is necessary to keep track about the bookings regularly this helps hotel manager to calculate the average daily rate and check the future demand.

The formula for calculating the occupancy is done by simply applying the following formula:

Occupancy (OCC) = Number of rooms that are sold/ Available number of rooms

ADR stands for average daily rate, which is also known as KPI that is basically used to measure the performance of hotels. The average price of each room is calculated everyday so that it is sold accordingly(Landman, 2018). ADR is a factor that is used by hotels to improve their performance so that revenue and profit margins could also be increased.

The formula that is used for calculating the ADR is:

ADR= Revenue of the room/Total number of rooms old

Revenue per available room is denoted by RevPAR, it is one of the important factors to calculate the key performance of the hotel. It is a key factor that is used to determine the revenue earned by a hotel at a specific time period (Landman, 2018). The performance can be evaluated by comparing the figures calculated using PrePAR and the computed set of the hotel.

The formula that is used for calculating RevPAR is as follows:

Revenue per available room = Rooms revenue / Number of rooms available

The STR report of hotel can be calculated by following three findings that helps in analysing the hotel performance and conditions (Chathoth,  Ungson, Harrington & Chan, 2016). Listing the three key findings:

• By analysing the STR report, it can be said that RevPAR is quiet well of the hotel. From the analysis it was found that, revenue is increased by 25.5% of the week and on the other had the comp set of hotel that is the market contribution has increased only by 3.3%. If analysing the performance of hotel in terms of revenue it is quiet satisfying (Chathoth,  Ungson, Harrington & Chan, 2016).
• Considering the average daily rate it was found that ADR of hotel has shown a huge change and it was found that it got decreased by 9.8% in the whole week. If it is calculated of the competitors it was observed that it got reduced only by 3.4%. The reduction in ADR directly impacts the occupancy of the hotel. This factor somewhere degraded the performance of hotel (Baum, et. al, 2016).
• As last comparing the occupancy factor of the hotel as compared to other hotels, it was found that occupancy is better than the other competitors. It is seen that the occupancy increased by 39.1% and came to 91.8%. This happened because of low ADR ratio during the recent week. The market occupancy also changed and it was increased by 6.9% (Baum, et. al, 2016). Thus, from the analysis it was found that hotel has performed well as compared to the compset.

From all the above analysis, it can be concluded that the performance of hotel is up to make and good enough from all the other competitors in terms of revenue and occupancy. The best performing days of hotel is Sunday and Monday to Thursday (Enz & Thompson, 2011). The occupancy of hotel is poor on Friday which reduces the ADR ratio. This future decreases the revenue of the hotel and lowers the market PevPAR. It was found that on weekends and Friday the occupancy of room was high but still the revenue is less as compared to other days. If discussing the fact about Saturdays and Sunday it is found that occupancy was high as compared to other days but it was lower that the market (Enz & Thompson, 2011).

The reason behind the bad performance of these days was less demand in the market or less number of customers arriving at the hotel. The other reason is related to the service that was provided by the hotel, the high quality service was not offered due to rush and more demand (Carr,Ruhanen & Whitford, 2016). The service was not up to the mark due to which the daily rates were increased. Thus, the overall performance of hotel was affected by such conditions.

Role of Revenue Management System

There are many ways through which performance of hotel can be evaluated, one such way is through STR report and other ways through which action plan could be decided and performance could be improved are listed below:

• The competitors could be analysed by creating excel sheet and other tools that can help hotel managers to make correct decision. One such tool is hotel competitor analysis tool that allows making comparison on different parameters (Buhalis & Amaranggana, 2015). The hotel managers make use of this tool so that they can access the strategies and plans used by the competitors and then make future planning so that analysis could be done. The spread sheet should be in proper format so that strengths and weaknesses could be found. The aim of this tool is to improve the performance by making the modifications in the action plan and then improving the area in which modification is required (Buhalis & Amaranggana, 2015).
• The other method that is used for mentoring the performance of hotel is search engine optimization that is denoted as SEO. This method is widely adopted by many hotel managers to analyse the competitors and improve the brand image and make it popular among customers (Enz, 2010). This factor helps in bringing the hotel in the top most search list so that customers are attracted towards the hotel. When customers look for a hotel in a particular city then search it with the phrase” top hotel in the desired city. SEO then displays thousands of results but ranking it accordingly to the popularity. Thus, customers mostly tend to choose the top results displayed by SEO. Hence, it is an additional feature that is used by hotel managers so that they can bring their hotels in the top search. SEO also support hoteliers to search and update their competition on the online platform (Berry, LaGreca & Bruynzeel, 2018).  This is how the hotel managers can properly analyse their competitors at time of improving their searches.

Yield management deals with reaching to the right customers at the right time with the correct product (Dhiman, 2016). Some of the yield management techniques that are used to improve the overall performance are discussed are:

• Establishing the market segment- This strategy is used in yield management by the hotel manager in which they divide the target audience into various segments and sub-segments. It supports the managers to look the requirements according to the location and then design policies so that customers are attracted towards it (Gretzel,  Sigala, Xiang & Koo, 2015).The sub segments are analysed and then facilities are offered so that customers could be targeted and revenue could be increased.
• Open pricing strategy- This helps in making pricing decisions so that profit margins could be maximised. It makes the decisions by checking the demand of each segment. It also allow hotel to define different pricing policies so that customers choose the best option that is available (Gretzel,  Sigala, Xiang & Koo, 2015). The room prices should be adjusted according to the demand and they should not be fixed. Fixing the price according to the demand will help hotel to enhance adaptability and flexibility. Additionally, the pricing strategy states that best discount offer should be offered to customers rather than just giving fixed discount.
• Maintain demand calendar- This technique is used by the managers to make decisions by analysing the statistical data that is maintained. The demand calendar also helps in measuring the overall profit margins and revenue generated by the hotels. It also helps in knowing the positive as well as negative demand in the market (Budeanu,  Miller,  Moscardo & Ooi, 2016). The performance could be improved if the demand of customers is known clearly especially the consequences faced on Friday and Sunday could be resolved (Ladkin & Buhalis, 2016).
• Maintenance of data- Theaccurate data and past records should be maintained so that right decisions could be taken on time. The correct data helps in analysing the situation and male correct pricing decisions so that revenue margins could be increased and the yield of hotel could also be increased (Ladkin & Buhalis, 2016).
• Focusing on direct booking- The direct booking should be promoted by hotel manager’s that audience gets attracted towards it. Theses time of steps contributes in increasing the revenues of hotel. Thus, the website should be designed in a user friendly way and should remain updates so that customers can making their booking easily and also choose among all the other options (Battour & Ismail, 2016). The pre booking can help the hotels to improve their service and management department.

Some of the stakeholders to which these strategies need to be communicated are as follows:

• Suppliers- One of the stakeholders who take part in such activities is suppliers they supply various stuff so that demand of customers are fulfilled. They also offer a detail listing of all the products in a summarised way so that suppliers can bring up innovative strategies (Pojasek, 2017). They also design monthly subscription plans, newsletter or advertisement so that all the information regarding the hotel is reached to the customers.
• Investors- The other stakeholder that takes part in the property is the investors. They are the audience who invest in such properties so that they can get their money back with higher interest. The amount of interest is completely dependent on the profit margins of the hotel. The more the investors better is the yield management. The investors can be made by building regular conference calls and meeting so that they can remain updated (Pojasek, 2017). Both the written and oral communication allows the hotelier to share the strategies with investors and to have feedback on the same. The assistant is done by the investors in form of funds.
• Employees- They are one of the main stakeholders as they are the one who are responsible for overall working of hotel and other factors. They assure that there is clear communication between the staff members and employees. They conduct formal meeting so that management is done accurately (Papadopoulos & Hamzaoui-Essoussi, 2015). They work together in a direction so that profit margins and revenue could be increased. They are allowed to provide new and innovative ideas regarding the same so that more audience gets attracted.

Aside from the rooms, the two territories where yield administration techniques can be connected are the marketing department and the sales departments that aim to bring most recent innovation in the hotel. Procedures that can be utilized in these two zones:

• Designing the demand logbook implies keeping the hotel technology innovated and refreshed according to the need of customers as this will pull in more visitor and yield more income. It will likewise be useful for the promoting office as it will keep them refreshed with the current interest and costs of the rooms and administrations given by the inn (Xiang,  Magnini & Fesenmaier, 2015). They keep the marketing department updated so that services and prices of the rooms are provided by the hotel.
• Pricing system is the one which can be connected by advertising deals in the office while charging from the shoppers for the administrations. Additionally the inn must guarantee that the innovation bought ought to be at sensible costs.
• Data support is another technique which will most likely help in smooth working of both the divisions. Individuals in advertising and deals must stay up with the latest information identified with the interest and supply(Xiang,  Magnini & Fesenmaier, 2015) . It helps in making the functions smooth so that demand and supply remains balanced.

References

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