Lesson 6

1.

HOTELREVENUEMANAGEMENT
Olga Shishkina

2.

Let’s check!
• Which industry Revenue management was derived
from?
• Give the definition of Revenue management
• Which are the steps to create a RM system?

3.

Revenue indexes

4.

Main indexes of hotel operation
Hotel’s subjective performance
Occupancy (%) is percentage of available rooms that
were sold during a specified period of time
AHR (or ADR) is a measure of the average rate paid for
rooms sold
RevPAR is revenue per available room

5.

6.

Hotel’s market performance
MPI (market penetration index) is an index designed to measure
a hotel’s share of the segment’s (comp set, market, tract, etc.)
demand (demand = rooms sold).
ARI (average rate index) is an index which measures a hotel’s
ADR performance relative to an aggregated grouping of hotels
(e.g., competitive set, market, submarket/tract).
RGI (revenue generated index) is an index which measures a
hotel’s fair market share of their segment’s (competitive set,
market, submarket, etc.) revenue per available room.

7.

Hotel’s market performance calculation

8.

Where to take market/comp. set data?
http://youtu.be/zLYEFaiihBo

9.

Fair share is a hotel’s fair “piece of the pie” in the
market. Fair share is index equal to 100%.
An index higher than 100% means your hotel’s absolute
performance is better than competition; an index lower
than 100% means your hotel’s absolute performance is
worse.

10.

STR property report interpretation
At the top there is the property’s name
mentioned
Below the hotel’s name there are
competitors mentioned (Comp Set)
Report consists of 3 parts: occupancy, ADR
and RevPAR

11.

Occupancy part:
This Year – current year’s occupancy of both my property and comp set
Last Year – last year’s occupancy of both my property and comp set
% Chg – percentage of occupancy change of both my property and comp set. If the figure is positive – the
occupancy vs last year grows, if negative – decreases
Index MPI - compares your hotel’s performance vs competition
% Chg – shows how your MPI index performs vs LY. If the figure is positive – your hotel’s market share
grows, if negative – decreases
Rank - Your hotel’s performance is ranked against the other properties in your comp set. If your hotel’s
occupancy rank is “2 of 6,” that means your hotel’s occupancy was second highest of the six hotels in your
comp set
Rk Chg – shows trend of change vs last year
Occupancy
Date
This Year
My Prop
Jan 2014
54.1
Last Year
Comp Set
51.3
My Prop
56.1
% Chg
Comp Set
44.0
My Prop
Index (MPI)
% Chg
Rank
Rk Chg
Comp Set
-3.6
16.7
105.5
-17.3
4 of 6
5 of 6

12.

ADR part:
This Year – current year’s ADR of both my property and comp set
Last Year – last year’s ADR of both my property and comp set
% Chg – percentage of ADR change of both my property and comp set. If the figure is positive
– the ADR vs last year grows, if negative – decreases
Index ARI - compares your hotel’s performance vs competition
% Chg – shows how your ARI index performs vs LY. If the figure is positive – your hotel’s ADR
market share grows, if negative – decreases
Rank - Your hotel’s performance is ranked against the other properties in your comp set. If
your hotel’s ADR rank is “2 of 6,” that means your hotel’s ADR was second highest of the six
hotels in your comp set
Rk Chg – shows trend of change vs last year
ADR
Date
This Year
My Prop
Dec 2013
3,016.86
Last Year
Comp Set
2,885.52
My Prop
3,050.91
% Chg
Comp Set
2,652.73
My Prop
-1.1
Index (ARI)
% Chg
Rank
Rk Chg
Comp Set
8.8
104.6
-9.1
3 of 6
5 of 6

13.

RevPAR part:
This Year – current year’s RevPAR of both my property and comp set
Last Year – last year’s RevPAR of both my property and comp set
% Chg – percentage of RevPAR change of both my property and comp set. If the figure is
positive – the RevPAR vs last year grows, if negative – decreases
Index RGI - compares your hotel’s performance vs competition
% Chg – shows how your RGI index performs vs LY. If the figure is positive – your hotel’s
RevPAR market share grows, if negative – decreases
Rank - Your hotel’s performance is ranked against the other properties in your comp set. If
your hotel’s RevPAR rank is “2 of 6,” that means your hotel’s RevPAR was second highest of
the six hotels in your comp set
Rk Chg – shows trend of change vs last year
RevPAR
Date
This Year
My Prop
Dec 2013
1,880.88
Last Year
Comp Set
1,351.31
My Prop
1,773.69
% Chg
Comp Set
1,196.10
My Prop
Index (RGI)
% Chg
Rank
Rk Chg
Comp Set
6.0
13.0
139.2
-6.1
2 of 6
5 of 6

14.

What’s the problem?
1st story:
Hotel A offers just one rate regardless of the time of
the year, day of the week etc. Hotel has 100 rooms –
all standards. Current management tracks
reservations, no-shows, but makes no forecast at all.
It’s only possible to make reservation by phone.

15.

What’s the problem?
2nd story:
Hotel B offers multiple prices but they are different
for different distribution channels. Hotel has rate
seasonality and has lower price for weekdays as
mostly used by leisure travelers. Forecast is done 1
year ahead. Hotel management doesn’t know what
is Booking.com.

16.

What’s the problem?
3rd story:
Hotel C offers multiple prices (retail, rates for loyalty
cards holders, for senior etc) but reception staff
thinks it’s all very complicated and offers only retail.
Hotel is mostly used during weekdays, so very often
hotel faces situation of fully booked Wednesday and
20% occupancy on Tuesdays and Thursdays.

17.

FORECASTING

18.

Are you planning your future?

19.

FORECAST is…
the best estimate of future results based on
demand & market-trends. It is the basis for
setting revenue strategies and is necessary for
accurate cost control (personnel planning,
expenditures etc).

20.

Types of forecasting

21.

Demand forecast…

22.

Five steps to create forecast

23.

Five steps to create forecast

24.

Next class on
the 28th of November
10:00-13:00
Topic: Forecasting frequency and
accuracy assessment. Right
price-setting. Rate fences
approach to pricing.