Revenue Management Definition and Fundamentals

Tuesday, 06 October 2009 14:06

In this first article we will go over the definition of revenue management. Additionally we will be covering the fundamentals of revenue management.

So what is the definition of Revenue Management again?

Selling the Right Room to the Right Client at the Right Moment at the Right Price

We would like to add the following to that definition:

On the Right Distribution Channel with the best commission efficiency

Revenue management (RM) helps to predict consumer demand to optimize inventory and price availability in order to maximize revenue growth. Revenue Management means not selling a room today at a low price to sell it tomorrow at a higher price. RM also means selling a room at low price today if you do not expect higher demand.

RM challenges the resources to gather information about the market so that you can be proactive and not reactive. Use the information to divide your market and adjust your products through distribution, to the right customer at the right time and at the right price.

Revenue Management is not only maximizing in high period demand, it helps stimulating demand in low periods while avoiding pricing cannibalism. Revenue Management is long term strategic, takes all revenue with their profitability into consideration, can sell low rates even in high demand period.

Why can you apply Revenue Management in Hotels?