Corporate Revenue
Management
Corporate Revenue Manager
Agenda
• Introduction of Revenue Management
• Pricing Philosophy for Shangri-La
Hotels and Resorts
Revenue Management is …
The ART of
turning
business
away
Revenue Management is also …
The SCIENCE
of stimulating
occupancy
without
sacrificing rate
Occupancy or Rate ?
That is the question …
Occupancy
A 76%
B 84%
C 96%
ATR
$
$
$
Revenue
$34,200
$34,200
$34,200
Rooms
Sold
171
189
216
This hotel has 225 rooms.
Definition of RevPAR
Rev = Revenue & PAR = Per Available Room
Formulas
Revenue / available rooms
ATR * Occupancy
ATR
$
$
Occupancy
A 76%
Revenue
$34,200
$34,200
Rooms
Sold
171
216
RevPAR Strategy
Occupancy needed to be
increased by 45 rooms (%)
ATR reduced $ (%)
96 %96 % CC
What happened to our profit?
Revenue Management history
• Prices of the US airline industry got de-
regulated in 1978
• Airlines started to segment their customer
base and to apply different prices for different
segments
• Severe price wars slashed profit margins
• Revenue Management was born
Why does Revenue Management work ?
• Segmented Markets
• Predictable, Variable Demand
• Fixed Capacity
• Perishable Inventory
• Relatively Low Variable Cost
A definition of Revenue Management
for Shangri-La Hotels and Resorts
Revenue Management is:Revenue Management is:
• the application of the application of rightright pricing strategies pricing strategies
• to allocate the to allocate the right right capacitycapacity
• to the to the rightright customer customer
• for the for the rightright product product
• at the at the rightright time time
• through the through the rightright channel channel
to achieve maximum revenue
Forecast
Demand
Retain
Demand
Manage DemandManage Demand
Yield and Business
Mix Strategy
Delighting our
GuestsRetain
Demand
Repeat
Business
Create Demand
Forecast
Demand
Demand Analysis
The Revenue Cycle
Optimize Demand
Demand Analysis
• Critical process in order to develop an
effective sales & revenue management plan
• External analysis:
• Understand the marketplace – demand versus
supply
• Business indicators
• Internal analysis:
• Historical performance
• Business patterns
Demand Analysis
• Pace pattern (How long in advance are the
bookings coming in?)
• Source pattern (Are bookings coming from your
domestic, intra-regional or long-haul markets?)
• Channel pattern (Are bookings coming through
the Internet, GDS, WRC or direct?)
• Stay pattern (What is the average length-of-stay
of this reservation and when is the arrival day?)
• Spend pattern (What is the incremental spend
from this reservation?)
Forecasting
Estimating the company’s share of market demand
based on defined market segments and an assumed
marketing environment
Why do we forecast?
• Staffing
• Scheduling
• Purchasing
• Comparison to Budget
• To optimize our business mix
• To implement an effective Yield Strategy
Accurate forecasting will eventually help:
Business Mix Optimization
Note that sometimes you can generate more revenueNote that sometimes you can generate more revenue
by changing your mix than by increasing your rate !by changing your mix than by increasing your rate !
What is the optimum business mix for your property?
Business Mix Optimization
Source: Cathy cartoon strip. All rights reserved
Yield Management
The idea is to use restrictions
(Minimum Length of Stay for
example) if demand
exceeds supply to maximize total
weekly rooms revenue.
Business Hotel Arrival Pattern
No restrictions
Revenue Generated: US$44,800 for a 100 rooms hotelRevenue Generated: US$44,800 for a 100 rooms hotel
ATR: US$100
OCC: 64%
20 group rooms
On Wed
Same Business Hotel, but
Minimum Length of Stay 2 nights on
Wednesday
Revenue Generated: US$46,200 for a 100 rooms hotel
ATR: US$100
OCC: 66%
20 group rooms
On Wed
Same Business Hotel, but
Different Minimum Length of Stay restrictions for
different rate programs on Mon, Tue and Wed
Revenue Generated: Revenue Generated: US$5US$52,3602,360 for a 100 rooms hotel for a 100 rooms hotel
ADR: US$110
OCC: 68%
20 group rooms
On Wed
Pricing
• Crucial component in the Revenue
Management Cycle
• 95% flows to the bottom line
(Source: Defining Revenue Management – Top Line to Bottom Line)
• A dynamic process
• Clear and simple
• Pricing integrity
Pricing Philosophy for Shangri-La
Hotels and Resorts
• Introduced in mid August 2008 for all properties
• 3 different pricing concepts:
• Seasonal Pricing
• Tier Pricing
• D-BAR (Dynamic Best Available Rate)
Seasonal Pricing
• Introduced in resorts with distinctive seasonal
demand patterns; and selective city hotels which
market is comparatively less volatile
• A single rate can be set up per season which
needs to be pre-defined (low, shoulder, high)
• Additional rate to be created for high demand
Special Events period
• 4 sets of rates (for Select & Value Rate) are
allowed
Tier Pricing
• Introduced in selective city hotels which market is
dynamic, but not ready to activate IDeaS BAR
Module
• 3 tiers of rates can be set up per season which
needs to be pre-defined (low, shoulder, high)
• Additional rate tier to be created for high demand
Special Events period
• Application of the actual rate tier (for Select &
Value Rate) is based on the forecasted
occupancy for the arrival day
Tier Pricing – Situation 1
Tier 1 0 - %
Tier 2 71 - %
Tier 3 90 - 100%
What if?
• Mon 75%
• Tue 65%
• Wed 95%
Which tier do you apply for Mon 3-night request?
Tier Pricing – Situation 2
Tier 1 0 - %
Tier 2 71 - %
Tier 3 90 - 100%
What if?
• Mon 91%
• Tue 92%
• Wed 95%
Which tier do you apply for Mon 3-night request if you
have 50% of your inventory sold to groups and the
market is soft?
D-BAR
• Will roll-out in 10 top destination hotels in
batches, which market is highly volatile
• Using IDeaS V5i Yield Management system, with
BAR Module to be activated
• A maximum of 15 rate tiers can be set up to
cover all seasons, weekday/weekend patterns &
Special Events period
• IDeaS V5i will recommend the Best Available
Select Rate by length-of-stay per arrival day,
taken into account competitors’ rate offer
D-BAR
• 2 options are given on managing Value Rates:
1. Maintain the same number of Value Rate tiers
and Select Rate tiers
. SR1 to SR15 vs RACK1 to RACK15
2. Apply non-dynamic flexing (reduce the number
of Value Rate tiers)
. group SR1 to SR3 -> VR tier 1 (RACK3)
group SR4 to SR6 -> VR tier 2 (RACK6)
group SR7 to SR9 -> VR tier 3 (RACK9)
Ultimately, 15 SR tiers vs 5 VR tiers
D-BAR - Situation
If IDeaS V5i gives the below BAR recommendation:
Mon SR2
Tue SR3
Wed SR4
What if, the hotel is managing Value Rate as follows:
SR1 – SR3: RACK3
SR4 – SR6: RACK6
SR7 – SR9: RACK9
SR10 – SR12: RACK 12
SR13 – SR15: RACK 15
Which Value Rate tier do you apply on Mon, Tue & Wed respectively?
Home Takers
• Ensure that business practice is strictly
adhered to
• Participate in the weekly Revenue
Strategy Meeting
Q & A
Thank You !
