Revenue Management- The Concept

Revenue Management for an organization means to Increase Profit, utilizing market demand and converting the demand in revenue maximization.

This utilization can be from:

1- Resources available are limited or fixed

2- Resources are perishable (as Vacant Seat in airline flying today cannot be used tomorrow)

3- Customer willingness to pay a different price for the same product/service (there will be  a difference between booking done in flight six months before & 1 day before the departure, here comes the role of demand and supply)

The strategy of Revenue Management is to focus on price rather than costs when balancing supply and demand. It suggests exploiting each products value cycle & continually re-evaluating revenue opportunities.

The strategy of Revenue Management is to focus on price rather than costs when balancing supply and demand. It suggests exploiting each products value cycle & continually re-evaluating revenue opportunities.

For Effective Revenue Management an organization must have:

1-Segmentation (Know your Customer based on Pricing) a different rate must be charged to Leisure guest and a Corporate Guest 

2-Price Fencing, it must be done properly in order to sustain for long term in market as the price must be according to market it may not be more or less.

Online Travel Agents (OTA) are considered as Frenemy for hotel business as they provide the business in the time of low occupancy as well as they cut the profit margins of hotel at the time of peak season, Here the part of Revenue Management plays effective role of taking decision how to deal  with situation and raise more revenue.

Tools for Revenue Management

A-STICKER 

Sticker is related to pricing strategy of Revenue Management, Sticker must be placed according the market condition as how the organization wants to capture the value of product or service. It must be marked different for Superior, Inferior & Substitute products or Service.

B-STOCK

Stock is the Holding Inventory with the company. The Revenue Management focuses on controlling & effective utilization of its Inventory as an when demand of market.

C-MARKETING

Organizations performance is mainly dependant on the way of product or service presented to the consumers by the Marketing, an effective marketing promotion helps to maximize revenue & increase the loyal customer.

D-MODE

Mode of Distribution plays a vital role in Revenue Management. It decides proper Channel of distribution that is cost effective for both organization & customer. For example a customer purchasing online is more Price conscious than a customer doing offline shopping so the channel of promotion & distribution must be through e-business or Web portal.

During the time of Recession Revenue Management played a vital role in effective utilization of available resources by the means of Cost Optimization.

“Poor marketing can damage an organization, poor pricing can damage an entire market”  -Colin Jasper.

-Dixit Mohit Tejkumar,

 Student, INLEAD 

Revenue Management by Ms. Manasi Bidikar

The International Hotel Management students of INLEAD were recently treated to a fun and interactive industry expert session on Revenue Management so as to reinstate the emphasis that teachers have always been laying on Revenue Management. Recent trends have shown that students are always very keen on Hospitality operations, while ignoring the revenue aspect. The session was a reminder for them on this department’s importance.

Ms. Manasi Bidikar - Revenue Manager – Taj Hotels Resorts & Palaces, Gurgaon was the guest speaker for the session. Ms. Manasi has been with the Taj group for almost a decade and her experiences are very rich and diverse. She took the students through her professional journey and laid a lot of emphasis on Revenue Management which is a very vital vertical for hospitality industry.

Ms. Manasi talked in great lengths on Revenue Management. She said that the strategy of Revenue Management is to focus on price rather than costs when balancing supply and demand. It suggests exploiting each products value cycle & continually re-evaluating revenue opportunities.

For Effective Revenue Management an organization must have:

1) Segmentation (Know your Customer based on Pricing) a different rate must be charged to Leisure guest and a Corporate Guest.

2) Price Fencing, it must be done properly in order to sustain for long term in market as the price must be according to market it may not be more or less.

Online Travel Agents (OTA) are considered as Frenemy for hotel business as they provide the business in the time of low occupancy as well as they cut the profit margins of hotel at the time of peak season. Here the part of Revenue Management plays effective role of taking decision how to deal with situation and raise more revenue.

She concluded the session by stressing on how during the time of Recession, Revenue Management plays a vital role in effective utilization of available resources by the means of Cost Optimization.

“The session proved to be extremely useful and we realized the importance of Revenue Management, having heard it from an industry expert,” said Dixit Mohit, July 2015, INHM.

 “It was a good introductory session on revenue Management, and the speaker’s experiences were quite awe inspiring,” said Naman Pare, July 2015, INHM. 

Money Matters!

Revenue Management has for long been the cornerstone of every successful enterprise but with the emergence of ecommerce and various other such trends, this concept has seen some drastic changes over the years.

In order to keep our students abreast with the latest trends and techniques of Revenue management, INLEAD organized an Industry Expert session with Mr. Sandeep Joshi, General Manager of Fortune Select Excalibur, Gurgaon on 15th May, 2015. Mr. Joshi has over 24 years of rich experience in the Hotel Industry.

The session which lasted for over two and a half hours covered the A to Z of revenue management. From addressing the basic question of ‘What is Revenue Management to its latest techniques like SPARR (Special Potential Average Room Rate), Mr. Joshi made sure that INLEADers didn’t miss out on any important information.  He burst out the popular myth that revenue management only deals with money management and educated the students that the concept basically deals with making sure that the right product reaches the right customer at the right time and at the right price.

Talking about the concept’s origin, Mr. Joshi enlightened the students that the concept was first introduced in the 1970’s by the airline industry.  It was invented by major US Carriers after the airline deregulation act forced them to compete with new low cost carriers.

Mr. Joshi kept the entire session quite lively and interesting by incorporating his own professional experiences throughout the session.  Listening to Mr. Joshi’s journey from an assistant catering head to a General Manager in a world renowned Hotel instilled the students with gumption and excitement for a bright future.

In the end, the session concluded with Mr. Joshi encouraging the students to stay focused on their long term goals and keep working hard towards achieving them.