Hotel Revenue Management Glossary

Need to know what a hotel term means? Look it up in the Xotels Glossary. We explain definitions of terminology industry lingo from hotel revenue management, ecommerce, marketing and distribution.

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Term Definition
Rack Rate

What is the meaning / definition of Rack Rate in the hospitality industry?

When it comes to setting prices for rooms, establishing the highest rate is important. This rate is called the Rack Rate, and it is from this maximum price that all other rates take their lead. But that is not to say that one Rack Rate will apply to every room in a hotel. No. With rack rate setting it is essential to apply a different rate to each room category, otherwise occupancy (and therefore revenue) could be adversely affected.

Rate Fences

What is the meaning / definition of Rate Fences in the hospitality industry?

Rate Fences are rules that apply to rates. Meaning that to book a certain rate, there will be specific conditions that will apply to your reservation.

If a hotel discounts a standard rack rate for a specific time period (i.e. flash sale) it usually aims to attract new clients who maybe would not be willing to pay a standard rate. However the hotel doesn’t want to offer the same discounted rates to a customer who is willing to pay the standard rate. Therefore, what the hotel can do is to put so called Fences ‘around the special offer rates’ to protect/ justify the non-discounted rates against existing clients (guests who have already booked at a normal rate can´t ask for a discount anymore).

Hotels use rate fences as part of their yield strategy and to optimize their revenue results.

Synonyms: fences, fence, rate fences
Rate Hurdle

What is the meaning/ definition of Rate Hurdle in the hospitality industry?

The term Rate Hurdle also known as Lose-It Rate refers to a type of rate that sets a threshold that must be crossed by the channel manager to reserve a room. It generally frames the case at which a hotel is better off leaving the room vacant than to sell it. Hotels commonly do this in peak times in advance of reservations. The Hurdle Rate helps informing that rooms should be sold to whom, when and at what price to achieve maximum profitability for a hotel.

A hotel calculates this rate if it plans on selling the rooms individually or to a group at a higher rate closer to the date.

Rate Integrity

What is the meaning / definition of Rate Integrity in the hospitality industry?

A term used to value a hotels rates and not allow dramatic discounts for better long-term revenue results for the hotel and the surrounding area and competition. Also used to justify the reason for a discount of rack rates compare to other guests.

As a hotel trying to maximise revenue, it is tempting to cave in and offer last-minute rooms for a steep discount, for offer a hotel room at 50% off is better than generating no revenue from it at all. Many hotels find that slashing their prices over completion, increases their revenue and drive new market traffic to them.

Rate Parity

What is the meaning / definition of Rate Parity in the hospitality industry?

All individual hotels and hotel chains should seek to engender a positive affective commitment towards their brand. But loyalty felt by guests can, of course, take time to build up. One great way to foster allegiance over time is to build Rate Parity into a pricing structure. In fact, a revenue management team that fails to recognise the benefits of Rate Parity is making a mistake and should think again. Why? Well, let's begin answering that by explaining more what Rate Parity actually is, before moving on to giving a clear example...

Regret

What is the meaning / definition of Regret in the hospitality industry?

Sometimes reservations just don't work out. For whatever reason, prospective guests decide to cancel a booking, or not to complete it in full. This is especially common where bookings are made online, where it is so easy to click off a web page and look elsewhere on the Internet for a perhaps better (lower priced) deal.

Remote Revenue Management

What is the meaning / definition of Remote Revenue Management in the hospitality industry?

The term Remote Revenue Management, refers to the practice of revenue management done remotely.

Revenue Management focuses on selling the right room to the right client at the right moment at the right price.

Revenue management helps to predict consumer demand to optimise inventory and price availability in order to maximise revenue growth. The purpose of Revenue Management is not selling a room today at a low price to sell it tomorrow at a higher price. Revenue Management also means selling a room at low price today if you do not expect higher demand.

Representation Company

What is the meaning / definition of Representation Company, in the hospitality industry?

Representation Company is a company that manages either the entire hotel or an outlet at the hotel on behalf of the property. As part of outsourcing, a representation company can be on-site or off-site, depending on the needs of the hotel.

Reservation Fee

What is the meaning / definition of Reservation Fee in the hospitality industry?

The term reservation fee, refers to the fee charged by a hotel for booking a room. It is very similar to a Security Deposit - meaning it is paid in order to secure the room of the buyer. Though it is only then refundable if the buyer cancels the booking before the fees deadline. The fee once paid takes the property off the market temporarily, giving the potential buyer exclusivity upon the unit.

Reservation fees protect the hotel, as they allow it to have some kind of security that if the room does get cancelled they receive compensation for the cancelled booking.

Resort Fee

What is the meaning / definition of Resort Fee in the hospitality industry?

A fee that is an additional charge to the room rate at resorts. This fee may be a base fee, daily fee or a percentage based on the price of an overall stay and is mandatory to pay. This fee may cover all amenities and services or select amenities whether or not a guest uses them.

The majority of national hotel brands and resorts use this charge to gain addition revenue to put towards extended services or products that are not in the room rate. This is also a popular fee in travel focused metropolitan areas like Las Vegas, New York, the Caribbean, Florida or Hawaii.

Resort Hotel

What is the meaning / definition of Resort Hotel in the hospitality industry?

A Resort Hotel is a is a full service lodging facility, intended primarily for vacationers and usually located in places frequented for relaxation or recreation, such as beaches, seashores, scenic or historic areas, ski parks, spas.

Revenue Generation

What is the meaning / definition of Revenue Generation in the hospitality industry?

The term Revenue Generation, refers to the process of creating sales of products and services, with the goal of creating income.

For example, a company wants to generate a hundred thousand euros of revenue this year. Then, the company needs to set up a strategy to reach this objective.

Different tactics exist, according to each business. These tactics include every department, not only sales and marketing. Indeed, to be competitive, you have to stand up from your competitors.

Revenue Management

What is the meaning / definition of Revenue Management in the hospitality industry?

Running a successful hotel does not simply involve selling as many rooms as possible in any given trading gear, in a kind of random first-come-first-served way with a 'hope for the best' atmosphere surrounding things. No. The key to achieving sustained success in the Hospitality Industry is to be hard working, organised and to work to a well-orchestrated strategy formulated and managed by experienced professionals.

Revenue Management Dashboard

What is the meaning / definition of Revenue Management Dashboard in the hospitality industry?

The term Revenue Management Dashboard, refers to the graphical user interface that is able to provide a at-a-glance view of key performance indicators (KPIs) relevant to business processes. Sometimes the phrase dashboard also refers to "Progress Reports".

Today’s best-in-class Revenue Management System = (RMS) display data in a dashboard format to provide users with quick insight into their historical and future business performance. The dashboard allows you insights into key data needed to assess your hotel’s health and help drive revenue decisions for your properties.

Depending on the dashboard, it may include calendar views with heat maps that visually identify upcoming dates with high or low occupancy levels. This makes it easy to spot any date ranges that need extra attention or investigation with a quick glance. General managers can benefit from checking here for daily occupancy checks and sales managers often reference this in conjunction with incoming group accommodation requests.

Revenue Management Formulas

What are the most important Revenue Management Formulas in the hospitality industry and how to calculate them?

Here you will find the top 5 Key Performance Indicators (KPI):

Synonyms: Revenue Management Formulas

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