Introduction to Revenue Management – By Kammelh Kishorre

A man with a stack of coins on his desk
Introduction to Revenue Management

Revenue Management is knowing how the hotel business will behave / Respond to certain actions.Action are based on Forecasting. Forecasting is looking into the future and predicting Market and Hotel Demand.

Revenue Management expert Kammelh Kishorre shares his tips and explains in-depth about revenue management below:

Perception of Revenue Management in Hotels:

Revenue Management has now become a critical department of any hotel. There are lot of mis-conceptions about Revenue Management. Revenue Manager is picturized as some guy sitting in a room and working on numbers, graphs and reports. I have also come across some individuals who believe Revenue Management is a function of Finance and Accounts.

Revenue Management is generally portrayed as a very complicated subject. In my experience, Revenue Management is a good understanding of behavior and predicting the future. If we can predict the future accurately, we can change the future by taking certain actions.

What is Revenue Management? What is the role of a Revenue Manager?

Now a days, there is a lot of confusion about what is the responsibility of a Revenue Manager. As the title suggests: Revenue Manager is responsible for Management of the Revenues coming into the hotel through various channels. In simple words: Sales is responsible to generate demand and Revenue Manager is responsible to Manage the demand.

Revenue Managers are generally given the responsibility to generate business through electronic channels and In-house reservation department. Yes, Pricing and Managing Online Channels is responsibility of a Revenue Manager. However, this is not the right parameter to measure the performance of a Revenue Manager. Revenue Manager’s Key Performance Indicator is RevPAR (Rooms Revenue Per Available Room) and TRevPAR (Total Revenue Per Available Room). In Revenue Management, another performance parameter added is GOPPAR (Gross Operating Profit Per Available Room).

Revenue Manager predicts the market and hotel demand through forecasting. Post this, we take actions to change the hotel demand. There are many actions we can take to change the demand level for a hotel. Some of the actions we take, are: Pricing, Yield Management – LOS (Length of Stay Restrictions), CTA (Closed to Arrival), Channel Management – Opening & Closing certain channels.

How do we understand the Behavior?

We take lot of actions in Revenue Management related to Pricing, Yield Management, Channel Management etc. A good Revenue Manager will always measure the impact of any action taken. This step is key for the Revenue Manager, as the same strategy / Action can be copied and pasted, if the hotel is in similar situation again. (Given the other parameters have not changed).

Pace Report Analysis: Daily Pace analysis helps a Revenue Manager to understand the Behavior of the pick up by Day of the Week. This gives an indication, where the action needs to be taken to bring the pace in line with hotel behavior and as per market demand.

We perform Price Elasticity test to understand how the Occupancy % behavior impacts at various price points. This test is very critical for every hotel to understand BEP (Break Even Point). Price Elasticity Test needs to be done for various demand levels to get a clear and detailed analysis. Example: Day of the Week, Seasonality, etc.

This article has been supplied by guest writer – revenue management expert Kammelh Kishorre.

About Kammelh Kishorre

Kammelh Kishorre is the founder of RevMutu Consultancy Services.

He has over 15 years of experience in Hospitality and Revenue Management in Indian and International market. Kammelh has worked with global brands like Forte Group United Kingdom and InterContinental Hotels Group United Kingdom. During his tenure with Intercontinental Hotels Group, Kammelh worked in various roles from single property Revenue Manager to Multi Property Revenue Manager. Kammelh pioneered a new concept in Revenue Management in India to support hotels improve Revenues and Profits. He is currently supporting over 50 hotels across India and Overseas.

This article was originally published by STAAH. For more hotelier tips, trends, and news please click here.