Revenue Management Principles Research Articles

Using Technology and Customer Behaviour Characteristics to Improve Hotel Sales Performance

Booking window is one of the critical characteristics of customer behaviour that can influence hotel sales performance. Previous studies were focused mainly on the importance of booking window reporting in revenue management with lack of evaluation. This paper focuses on the evaluation of revenue management activities by analysis of customer behaviour with a focus on the use of modern technologies (Booking Engine, Channel Manager). Results show that the selected hotel is not following basic revenue management principles, which can be a reason for the year-to-year decrease in direct online sales and overall poor performance.

Dinamičko upravljanje cenama - teorija ili stvarnost za tržišta u razvoju - studija slučaja Srbije

Revenue management (RM) is a technique used in hospitality for over 3 decades. North American corporate hotel chains have started to implement RM principles already in the early '80s of the last century [13]. The basic principles of RM are dynamic pricing in which demand forecasting is having a major role. Today, almost 40 years after the introduction of RM, specific markets still have not implemented successfully the RM principles in their daily operations nor on a strategic level. In this paper, the research was conducted looking at the pricing strategy of Serbian hotels from 2013 to the end of 2017. The Serbian market is a rapidly growing tourism market as it records higher growth rates than the European and global average. However, Serbia is still an emerging market concerning the overall level of tourism development. Results of the research show that Serbian hotel managers manage their rates monthly, while RM on a weekly or a daily basis is used very little. Besides time management in pricing strategy, the research shows that the price is dominantly influenced by room supply, which is, as it was shown in the research, very static in comparison to demand. Simply said, hotels in Serbia pay more attention to the room supply rather than room demand. Furthermore, results from the research reveal that the market is witnessing a strong decrease in average daily rate (ADR). However, the drop in ADR is still leading to an overall increase in total revenue. Yet, tourism demand demonstrated significant intervals of price in elasticity where potential revenue was lost due to inadequate pricing policy. Therefore, we argue that the wider application of RM principles is necessary in order to maximize favourable trends of arrivals and overnights that Serbia has been recording in the last 10 years.

The Application of Revenue Management in Beverage Operations

In recent years, beverage establishments have grown in popularity among millions of people seeking leisure activities, nightlife attractions, and entertainment venues. Despite the prevalence of this well-established industry, beverage establishments have received little academic attention. The present study was designed to compare basic revenue management principles and characteristics with existing beverage establishments and suggest adaptations of those principles in the context of those beverage operations to optimize prices of their food and beverage products and entrance fees. This study involves a qualitative approach based on the interviews with 20 beverage operations managers from the United States and Europe.

Optimizing vacation exchange

Vacation exchange provides flexibility and variety to timeshare owners by allowing them to trade the vacation week that they own for a different week. Resort Condominiums International (RCI) pioneered vacation exchange over 35 years ago and has been at the forefront of the vacation exchange industry ever since. In November 2010, RCI launched transformational product enhancements, which give RCI members added flexibility to exchange. These product enhancements are designed to increase member satisfaction with a secondary goal of better inventory utilization. Revenue management principles are at the core of the mechanism that helps achieve these objectives. This article discusses two optimization models implemented at RCI.

Cochlear implant programs: Balancing clinical and financial sustainability

In 2006, a tertiary academic medical center's adult and pediatric cochlear implant program was closed due to financial losses. Using business practices known as supply chain and revenue management, the objective was to establish a new cochlear implant program that was financially viable. Retrospective cohort study using a nonequivalent historical comparison group design. Using available financial data from the period of 1999 to 2006, cost and revenue figures were estimated, and a business plan developed using supply chain and revenue management principles to re-establish the cochlear implant program in 2007. Actual cost and revenue data from 2007 to 2011, the current program, were assessed for current financial performance and compared to the historical data. In comparing the period of 1999 to 2006 to the period of 2007 to 2011, the net loss per implanted patient went from $22,365 to $976. Profitable gross and net margins were achieved for all payers except Medicaid, for which the loss per case remained unchanged. This per case loss may change with receipt of pending Medicaid Upper Payment Limit supplemental payments. Use of supply chain and revenue management principles markedly improved the financial performance of the re-established cochlear implant program. With improved cost and revenue outcomes, the overall negative net margin was reduced. Physicians who learn and use supply chain and revenue management methods can work to ensure that their patients will have continued access to cochlear implant surgery, and are applicable to any clinical services or procedures that must meet the challenge of achieving financial sustainability.

Visitation at capacity-constrained tourism destinations: Exploring revenue management at a national park

This study explores issues related to the introduction of revenue management principles in the mechanism of allocating permits to visitors. Specifically, the study looks at ways in which backcountry hikers in Grand Canyon National Park, a World Heritage Site listed among America’s most visited tourism attractions, value a particular allocation mechanism for a permit application. From a stratified random sampling scheme with a 76% response rate, over 1400 overnight backcountry hikers reported the potential for considerable increased revenues. At the same time the findings indicate that certain demographics and user groups will not participate in the modifications, and thus, may be less likely to get a permit when they apply for one. Any policy implementation from such an analysis needs to consider the implications of privileging those who are both willing and able to pay more for access, and effectively excluding others from the same opportunity.

Dynamic scheduling of recreational rental vehicles with revenue management extensions

The rental fleet scheduling problem (RFSP) arises in vehicle-rental operations that offer a wide variety of vehicle types to customers, and allow a rented vehicle to ‘migrate’ to a setdown depot other than the pickup depot.When there is a shortage of vehicles of a particular type at a depot, vehicles may be relocated to that depot, or vehicles of similar types may be substituted.The RFSP involves assigning vehicles to rentals so as to minimise the costs of these operations, and arises in both static and online contexts. The authors have adapted a well-known assignment algorithm for application in the online context. In addition, a network-flow algorithm with more comprehensive coverage of problem conditions is used to investigate the determination of rental pricing using revenue management principles. The paper concludes with an outline of the algorithms’ use in supporting the operations of a large recreational vehicle rental company.

Improving Hospitality Industry Sales

From its origin in the airline industry nearly sixty years ago, revenue management has expanded to other hospitality industries, notably lodging and rental cars. More recently, “nontraditional” service industries, such as restaurants, golf courses, and casinos, have begun to adapt and apply revenue management principles. The first revenue-management—related article appeared in the Cornell Quarterly in 1988—an article that introduced revenue management concepts to the hotel industry. Subsequently, the Quarterly has published numerous revenue management studies, covering hotels, restaurants, golf courses, and function space. In addition, CQ has examined distribution and pricing issues. This review of twenty-plus years of CQ articles documents the expansion of revenue management themes as published in the Quarterly and suggests directions for future revenue management research.

Implementation of cargo revenue management at KLM

The practice of revenue management (RM) is well-established in the passenger airline industry. In the cargo industry, however, the RM concept is underdeveloped. This practice paper describes how KLM Cargo implemented RM and how it learned to overcome the difficulties related to this. First, some key characteristics of the air cargo industry are described that are crucial to RM. After the introduction of RM principles and organisation, processes and systems are discussed. The final section highlights learnings and critical success factors during implementation, as well as plans for the future.

Hotel revenue management and its impact on customers' perceptions of fairness

At the core of revenue management principles lies the concept of demand-based variable pricing. Hotel managers are concerned that pricing hotel rooms according to this concept may alienate customers due to the perceived unfairness of the practice. This study measured the effect of hotel demand-based variable pricing practices on customers' perceptions of fairness. In addition, it examined the moderating effect of information about the hotel's room pricing practices offered to customers at the time of reservation. Contrary to common belief, in most of the scenarios tested, hotel variable pricing practices did not result in lower perceptions of fairness among customers. The practice resulted in significantly lower perceptions of fairness in only one scenario. Moreover, if information on the hotel's room pricing practices was offered to customers at the time of reservation, even that one scenario did not result in lower ratings of perceived fairness.

Golf course revenue management: A study of tee time intervals

Golf courses have two strategic levers, round duration control and demand-based pricing, that they can deploy in a revenue management programme. Before embarking on a revenue management programme, golf courses must first clearly define their capacity. This study uses simulation to study the most controllable factor of capacity: the tee time interval. Intuitively, reducing the interval between parties will lead to an increase in revenue; however, this paper shows that interval reductions may actually lead to decreased revenue.Research in revenue management (RM) has previously addressed the theoretical and practical problems facing airlines and hotels, among other industries, but has given little attention to the golf course industry (Kimes, 1989; Weatherford and Bodily, 1992). The golf course business is similar enough to hotel and airline operations that golf courses should be able to apply RM principles (Kimes, 2000).Industries using RM generally measure their performance by calculating their revenue (or contribution) per available time-based inventory unit. For example, hotels calculate their revenue per available room-night (RevPAR), airlines determine their revenue per available seat-mile (RevPAS), and restaurants rely on revenue per available seat-hour (RevPASH). Based on this logic, golf courses should measure their revenue per available tee-time (RevPATT), but the definition of availability is not as precise as in other industries. The number of available tee times is affected by both controllable and uncontrollable factors. Controllable factors include the length of a round of golf, the dispatching rule used, maintenance and the tee time interval. Uncontrollable factors include the number of hours of daylight and weather. Unless golf course operators have a clear definition of their capacity, they will not be able to measure the performance of their RM systems.This paper focuses on the most easily controllable factor affecting course capacity: the tee time interval. A dynamic simulation model was developed, which can be used to quantify the trade-offs in determining an appropriate tee time interval. Intuitively, reducing the time interval between parties might lead to an increase in throughput and revenue; however, tee time interval reductions may amplify the effects of the variations in pace of play and result in a reduced RevPATT.

Launching the Revenue Rocket

Revenue management (RM) is the application of disciplined tactics that predict consumer behavior at the micromarket level and optimize product availability and price to maximize revenue growth. While the application of RM principles depends on each company's competitive situation, the process is similar for all firms. Each firm should examine the applicability of RM to its situation, and specifically if its market is characterized by vagaries of demand, a perishable product (e.g., hotel rooms, restaurant meals), and strong competition. The firm's management should use data-analysis techniques to estimate untapped revenue potential. This estimate involves analyzing all available data to uncover hidden revenue potential through the computerized emulation of actual business environments and control processes. Finally, the firm should quantify the benefits of revenue management. Those responsible for managing revenue should be given express control over all revenue-generating functions, and top management should allow those revenue managers the leeway to make constant and rapid changes in the price and product mix. In the final analysis, revenue management allows a firm to create new time-based products on the spot, as customer demand for those products becomes apparent.