Revenue Management of Room Rates

This chapter provides an end-to-end view of revenue management of hotel room rates. Inventory preparation to create product categories, rate categories, and duration categories is discussed as the first step toward the revenue management process. Rate controls based on the calculation of the expected marginal room revenue are followed with a detailed discussion on revenue management by length of stay. Various types of inventory controls for controlling rooms by rate and by length of stay are reviewed in detail. Competitive revenue management based on competitor selling rates to set room inventory controls is discussed. Calculations of the best available rate, hurdle rate, restrictions, and dynamic pricing are described in detail. Overbooking models based on the conservative oversale rate constraint model and the economic models are reviewed. Estimating turned away demand is the first step toward demand forecasting. Various techniques for demand forecasting are followed by supply forecasting to determine the true effective room capacity for inventory control. Revenue management of groups to calculate the minimum acceptable rate is discussed followed with how revenue management has evolved in related verticals such as all-inclusive resorts, restaurants, casinos, and vacation rental by owner. The chapter concludes with a summary of the core value proposition of revenue management.