1 Posebnosti računovodskega poročanja in Revenue management v hotelirstvu Dr. Gorana Ivankovič, izr. Prof. UP FTŠ Turistica I. konferenca Združenja hotelirjev.

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Posebnosti računovodskega poročanja in Revenue management v hotelirstvu

Dr. Gorana Ivankovič, izr. Prof.UP FTŠ Turistica

I. konferenca Združenja hotelirjev Slovenije

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Benchmark hotelske verige

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European Hotel Prices in April 2013 increase by up to 38% following last month’s decrease

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Leto 2013 v Sloveniji

V prvih petih mesecih je v Sloveniji padla povprečna stopnja zasedenosti hotelskih zmogljivosti za 10 % v primerjavi z lanskim letom.

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Osnovne kategorije v hotelirstvu Sobe – temeljna kategorija (opredelitev zmogljivosti, % zasedenosti,

povprečna cena/soba, GOP/sobo, stroški dela/soba, rezervacijski in distribucijski sitemi, segmentacija gostov, dnevi v tednu po zasedenosti…)

Hotel – temeljna enota poročanja po USALI Zajemanje stroškov (neposredni, splošni obvladljivi, neobvladljivi) % GOP/Rev

Rev/PAR

ADR

BAR

Yiled percentige

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USALI

- Za namene predvsem finančnega računovodstva

- Vpliv ameriških mednarodnih hotelskih verig- Enotni standardni sistem računovodskega

poročanja na ravni poslovne enote

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USALI

POROČANJE PO POROČANJE PO POSLOVNIHPOSLOVNIH ODSEKIH ODSEKIH JE V SVETOVNI JE V SVETOVNI HOTELSKI INDUSTRIJI HOTELSKI INDUSTRIJI PRISOTNO ŽE OD PRISOTNO ŽE OD LETA 1926!LETA 1926!

Kaj je USALI ?

Kratica od:Uniform System of

Accounts for the Lodging Industry

Pomeni: Enotni sistem računovodskega

poročanja v svetovni hotelski industriji

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USALI (UNIFORM SYSTEM OF ACCOUNTS FOR THE LODGING INDUSTRY)

KAJ JE TO – Standardi poročanja v svetovnem hotelirstvu in prvi uspešno organiziran poskus vzpostavljanja računovodstva odgovornosti

KJE SE DOBI - Knjiga USALI - X izdaja iz leta 2006, American hotel & Motel Association

OD KDAJ JE V UPORABI - Od leta 1926, začetnik Hotel Association of New York City

KAKO FUNKCIONIRA – omogoča primerjavo dosežkov posameznega hotela s povprečjem primerljive skupine

Koordinira konzultantska hiša “Horwath&Horwath” – World Wide Hotel Industry

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UPORABNIKI POROČIL : ZUNANJI IN NOTRANJI (ravni poslovodstva) : najvišje poslovodstvo srednja raven poslovodstva nižja raven poslovodstva

USALI DINAMIKAPOROČANJA: dnevno tedensko mesečno letno

VSEBINA POROČILA : VRSTA INFORMACIJ, KI JIH POSAMEZNA POROČILA MORAJO VSEBOVATI ? temeljna finančna poročila notranja poročila (odseki in stroškovna mesta) odvisno od vsebine ponudbe

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RAČUNOVODSKE REŠITVE V HOTELIRSTVU

PRI STROŠKIH IN ODHODKIHHotel mora zagotavljati podatke:z o neposrednih stroških posebej za

vsako dejavnost (stroški prodaje, stroški dela in drugi stroški)

z splošne spremenljive poslovne stroške (administrativni in drugi upravni stroški, splošni stroški dela...)

z stalne splošne stroške (nagrade poslovodstvu, najemnine, stroški zavarovanja, obresti, amortizacija...)

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RAČUNOVODSKE REŠITVE V HOTELIRSTVU

PRI POSLOVNEM IZIDU HOTELA:Čisti prihodki po poslovnih oddelkih- neposredni stroški po poslovnih

oddelkihPrispevek I po poslovnih oddelkih- (obvladljivi) poslovni stroškiPrispevek II (GOP hotela)- stalni stroški (neobvladljivi)Prispevek III (poslovni izid hotela pred

obdavčitvijo)

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USALI OMOGOČA

primerjanje dosežkov hotelov (mednarodna raven)

enotno opredeljevanje kazalcev in kazalnikov za hotele in za posamezne ravni odločanja

nagrajevanje poslovodstva in zaposlencev skladno z dosežki

podlago državnim inštitucijam za odločanje v turizmu

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Temeljni odseki dejavnosti v hotelirstvu

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Hiltonova veriga vrednosti

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KAZALNIKI

PRETEKLI DENARNI DOSEŽKI

RAZMERE ZA USPEŠNOST V PRIHODNOSTI

- kratkoročna naravnanost

- možnost napovedovanja

DENARNI(hotelirstvo - USALI)

NEDENARNI

- transparentnost

- primerljivost - negativni trendi

POSEBNOSTI RAČUNOVODENJA

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Primer dobre prakse

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Primer dobre prakse

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Finančni učinki

Primer: Hotel na letališču

2011 2012

Zasedenost % 58 % 65 %

Povprečna cena 84,5 € 83,5 €

RevPAR 49 € 55 €

- 1 %- 1 %

+ 12 %

+ 12 %

+ 11 %+ 11 %

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Finančni učinki

Primer: Letoviški Hotel

2011 2012

Zasedenost % 70,6 % 76,1 %

Povprečna cena 55 € 52,5 €

RevPAR 39 € 40 €

- 5 %- 5 %

+ 8 % + 8 %

+ 3 %+ 3 %

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Kdo uporablja YM

letalska podjetjahotelska podjetjarent a car podjetjaorganizatorji potovanjorganizatorji križarjenj možnosti bi bile še golf igrišča,

gledališča, muzeji, turistične privlačnosti, zabaviščni parki…

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Accor groupRadisson SASForte - Le MeridienSavoy groupThistle groupSouthern sun groupScandic hotelsConcorde groupHoliday InnGrand Hotel HoldingsJarvisDorintEnvergure groupOberoi groupBest WesternSofitelChateaux et hotels de France

Sofitel FirenzeIbis Group Milano (7 hotels)Mercure Roma (3 hotels)Metha group (8 hotels)The Charming Group RomaHotel MilanoEden RomaBarchetta HotelVilla D’Este HotelAdvance GroupBertolio HotelsHotel EnterpriseHotel Savoy MajesticAntares GroupRipa All Suites RomaHotel Milano BrattoBoscolo Group (15 hotels)Gallia Milano ...

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Dejavniki uspeha pri YM

Učinkovita komunikacija med porabnikom in ponudnikom

Ustrezna organizacija poslovanja Integracija sistema YM z drugimi sistemi Prosti tok trženjskih informacij Splošno dinamičen trg

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Povpraševanje: Mix elastičnosti

Cenovna elastičnost = % ∆ povpraševanja

% ∆ v ceni

Prihodkovna elastičnost = % ∆ v povpraševanja

% ∆ v prihodih

Križna elastičnost = % ∆ v povpraševani količinX

% ∆ cene proizvoda Y

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Potrebne sestavine YM

Segmentacija trgaPodatki o preteklem povpraševanju,

gibanje rezervacij in gibanje povpraševanja po sobah za določeno obdobje ter napovedovanje povpraševanja

Metode in načela oblikovanja cenDobro oblikovanja načela prebukiranjarazvit informacijski sistem

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Kako se meri uspešnost YM?

Yield =

Prodane sobe

Razpoložljive sobe

xPovprečna cena

Najvišja možna cena

Yield =

Doseženi prihodki

Potencialni prihodki

x 100

x 100

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Faze implementacije YMZa implementacijo tipičnega YM programa se potrebuje cca.

od 2 do 3 leta

Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8

Identifikacija potreb

Implementacija informacijskega sistema

Organizacija, izobraževanje,in nagrajevanja

implementimplement

Pre-requisitsPre-requisits

ImplementImplement

objectivesobjectives

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Koraki YM

1.

Analiza podatkov

2.

Predvidevanje3.

Določanje strategij

4.

Zbiranje povratnih informacij

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Delež prihodka v potencialnem prihodku – Yield percentage

Dejanski prihodek = Št. prodanih nočitev Potencialni prihodek Št. razpoložljivih

noč.

X Dejanska povprečna cena nočitve Potencialna cena nočitve

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Kako?

Na osnovi informacij, ki jih redno spremljamo, kot so:

ò pretekle rezervacije in povpraševanja skupin, individualnih gostov , nepričakovanih (walk- in) gostov, slučajnih (chance arrivals) gostov

ò pomembni dogodki v okolici ò aktivnosti konkurenceò promocijske akcije

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ò politiko overbookingaò poznavanje vedenjskih značilnosti potrošnikovò vremenske razmereò itd...

Te informacije bodo dale prodajnemu timu osnovo za oblikovanje cen svojih storitev

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STRATEGIJE YM

Ko smo na podlagi informacij predvideli povpraševanje ciljnih skupin je potrebno izdelati marketing mix za te ciljne skupine in strategije pridobivanja teh strank

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STRATEGIJE YM pa so:

popusti segmentacija paketi diferenciacija na podlagi dodane vrednosti repozicioniranje kratki oddihi določitev časa bivanja

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THE PRICING STRATEGY

Strategije oblikovanja cen

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THE PRICE: A DEFINITION Price is the sum of the value consumers exchange

for the benefits of having or using the product or service.

Further, prices are the only part of the marketing mix that directly create revenue.

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THE PRICE: FIRST QUESTIONS What is the price of a room and what is the

value? It is very difficult to give an answer because, you need to answer to several other queries first:

1. Where is the hotel?2. How far is from sea, motorways, the centre of

the town?3. Which period of the year?4. Which kind of hotel (stars, services, etc.);5. Which kind of service (B&B, HB, etc.);6. Which kind of room (single, double, suite, etc.);7. How many days do you live there?

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The most common mistakes in Pricing

Prices are too cost oriented. They are increased to cover increased costs and don’t allow for demand intensity and customer psychology;

Price policies are not adapted to changing market conditions.

Prices are set independent of all elements of the marketing mix.

Prices ignore the peculiarities of the customers. Prices are a decision of management rather than

marketing. Prices are set without to take into account the

marketing objectives to achieve.

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The Variables to make a Pricing Strategy

The variables to create a pricing strategy are:1. Internal variables;2. External Variables.

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Internal Factors

Financial objectives; Marketing objectives, Volume objectives; Fixed and Variable costs.

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Financial objectivesFinancial objectives are probably the most

dominant objectives in the hospitality industry.

Profit is the one that usually comes to mind first, but built-in profit determination may be hard to achieve in the hospitality industry.

Sometimes, the thesis that the higher the price the greater the profit is not true. Infact, high prices alone will reduce volume in most cases. So the operators reduce the price to get the customers with the double effect to reduce the revenue and to depreciate the product.

Another financial objective in pricing is target return on investment (ROI).

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Marketing Objectives Marketing objectives deal with the actions that a

hotel must do to affect in a favourable way the demand by price.

One of the marketing goals is to achieve the trust of the customer by clear and steady prices. This goal can be achieved by special rates for high spending costumers. (corporate rates).

Another objective could be to cut market share from the competition by strong promotional efforts. If a hotel offers a Unique Selling Proposition (USP) can start with the highest price that a high spending segment of customers can bear. In this case, the hotel can avoid the initial discounts.

Another objective could be to desensitize the customer to the price by all included price strategy. This is also called price bundling.

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Volume Objectives Some volume objectives are: to increase market

share and /or customer base, occupancy or seat turnover, and contribution to fixed costs.

In particular, occupancy objectives are very important in the hospitality industry, where fixed costs are high, whereas variable costs are low. Usually, they do not overcome 10 or 20% of revenue. As soon as fixed costs are covered a small earn can bring an important increase of the profit.

The best thing to do to improve the occupancy is not to reduce the price. The best strategy is to use promotional efforts to attract particular segments of customers or to convince the actual customers to stay longer.

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Fixed, Variable & Semi-Variable costs Fixed costs do not vary with changes in sales

volume. Examples are rent, rates, salaries, insurances, depreciation;

Variable costs vary in proportion to sales. Examples are: foods, beverages and laundry;

Semi-variable: vary in sympathy with, but not in proportion to, sales volume. Examples are: power, telephone and wages.

A hotel can reduce the prices to a certain extent depending on the quality and the amount of service offered. Infact, when the prices are too low the quality of service offered can be seriously affected.

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External Variables The market, the actual and potential demand; The availability of rooms in the area; The prices and the offer of competitors; Variables like: inflation, devaluation, downturn, etc.

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The Market Analysis A correct pricing strategy starts from a perfect

knowledge of the hotel’s market and position in an area and finally, who the competition is.

Who are potential customers and what do they look for? It is very important to know our customers and the potential of development.

It would need to be always up-to-date on current occupancies and arrivals of the area.

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Competition analysis It is very important to get the statistics of the

competition on subjects such as: number of rooms available, prices, good quality information on products and services offered, types of customers and proposals offered There are some indexes that can help with this analysis.

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The Fair Share

The Fair share is determined by dividing the number of rooms available at each property by the number of rooms available in the market as a whole.

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The Market Share

The market share is determined by dividing the number of property room nights sold by the total market room nights sold.

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The Fair Share and The Market Share: an example

Number of Number of RoomsRooms

Available Available RoomsRooms

Percentage Percentage OccupancyOccupancy

Rooms Rooms Nights SoldNights Sold

Our HotelOur Hotel 300300 109.500109.500 76.576.5 83.76883.768

Hotel AHotel A 454454 165.710165.710 70.070.0 115.997115.997

Hotel BHotel B 400400 146.000146.000 75.075.0 109.500109.500

TotalTotal 1.1541.154 421.210421.210 73.873.8 309.265309.265

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The Fair Share: Calculations

Fair Share = (Individual property available room nights/Total market available room nights). The amount must be multiplied x 100.

Our example: Our hotel would have a fair share of 26% (109.500 rooms divided by 421.210); hotel A would have a fair share of 39% and hotel B 35%.

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The Market Share: Calculations

Market Share = (Individual property room nights sold/Total market room nights sold). The amount must be multiplied X 100.

Our example: Our hotel would have a market share of 27% (83.768 room night sold divided by 309.265); hotel A would have a market share of 38% and hotel B 35%.

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The Fair Share – The Market Share: Concluding Remarks

According to the suggested example, our hotel’s market share is 1% more than its fair share; the hotel’s A market share is 1% less than its fair share while the hotel’s B fair share and market share are the same. These figures show that our hotel is enjoying a small measure of success, while the hotel A is at a disadvantage in the market and the hotel B is just holding its own.

This market analysis is helpful both in terms of tracking area market trends and in measuring the impact of various marketing strategies.

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The Market Penetration IndexIt is the index (based on 100) that allows to

verify what is the percentage of the hotel compared to that of the market. You can achieve that by: (Market Share/Fair Share).

If the result is higher than 1 (or you sold more rooms than your fair share) your penetration index compared with that of the market will be growing, differently, will be falling.

In particular, this easy ratio compares effectively the market share that one has to achieve – based on the number of rooms compared with those of the total market.

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The Competitive Market AnalysisRooms Rooms

available available dailydaily

Rooms Rooms available available

yearlyyearly

% Fair % Fair ShareShare

Rooms SoldRooms Sold % % OccupancyOccupancy

% Market % Market ShareShare

Market Market Penetration Penetration

IndexIndex

Our HotelOur Hotel 8585 31.02531.025 17.817.8 20.08320.083 64.764.7 17.817.8 1.001.00

Hotel 1Hotel 1 140140 51.10051.100 29.329.3 32.74832.748 68.068.0 27.927.9 0.950.95

Hotel 2Hotel 2 6969 25.18525.185 14.414.4 13.21313.213 64.164.1 11.711.7 0.920.92

Hotel 3Hotel 3 124124 45.26045.260 25.925.9 29.81429.814 65.965.9 26.526.5 1.021.02

Hotel 4Hotel 4 6060 2190021900 12.612.6 16.68116.681 76.276.2 14.814.8 1.171.17

TotalTotal 478478 174.470174.470 100.00100.00 112.538112.538 64.564.5 100.00100.00

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Price methods

Mathematical methods (or costs oriented);

Empirical methods (or market and competitors oriented.

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Mathematical Methods Cost – Plus Pricing; Mark-Up Pricing or Percentage Cost Break-Even Pricing; Contribution Margin Pricing; Building Cost Rate Pricing (or 1X1000 method); Method of Inflationary Calculation.

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Cost- Plus Pricing This method involves establishing the total cost of

a product, including a share of the overheads, plus a predetermined profit margin. A common use in pricing Food and Beverages is to relate the profit margin to the selling price.

Thus if the desired profit is 20% of the selling price, an item that costs € 4, plus € 2 labor and 2 overhead, would be priced at € 10. This results in 2€ of profit for that specific item.

Limitations: Cost plus pricing does not allow for flexibility in pricing decisions, nor does it take into consideration consumers’ perceptions of a product value. This method is totally cost oriented and ignores demand. Further, this method is also subject to mis-allocation of fixed and variable costs which needs to realise the hotel’s service product.

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Mark-up Pricing or Cost Percentage This method is heavily used by the restaurant

industry. The selling price can be achieved by multiplying the cost of the product by an extablished co-efficient, or a mark-up. If a restaurateur buys a bottle of wine for the price of €10 and resells it at €15, his gross margin is €5. It means that he will have applied a mark-up of 50% of cost and of 33% of the selling price.

Limitations: this strategy is totally cost-oriented; it ignores consumer perceptions of value, particularly in times of widely fluctuating costs; it tends to price high-cost items up to a level that customers are unwilling to pay.

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Break-Even Pricing

Break-even pricing is used to determine at what sales volume and price a product will break-even, where costs are equal to sales.

It distinguishes between fixed and variable costs. The break-even point is graphically plotted for

prices using the same fixed and variable costs. By plotting the revenue generated at various prices, a comprehensive picture of profit can be created if the demand is known at various levels.

Break-even analysis is a fairly efficient method of determining profit margins at various price levels if sales volume can be accurately predicted at the different price levels. To predict this volume, knowledge of consumer perception and demand is still needed.

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Break-Even Pricing: An Example

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Contribution Margin Pricing This technique is very useful for hotels in soft

periods of demand: Rooms prices can be discounted substantially, in order to have them occupied. Even though no profits are made, a portion of the fixed costs that would occur if the room was not occupied would be covered.

The success of this technique must be assessed by examining the total revenues from the rooms sold. After all, selling more rooms at discounted prices may have the same effect as selling fewer rooms at higher prices.

Limitations: this method looks for an increase of occupancy, but, can be very difficult in improving the overall profitability of the hotel. Furthermore, there is a risk is of depreciating the offers.

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Building Cost Rate Pricing (or 1X1000 method)

This is a unique method for establishing the selling price of hotel rooms. Although it should serve strictly as a rule of thumb, it is still widely used as a measure in the hotel industry.

The rule is that the average room rate in a hotel should be €1.00 for every €1.000 of construction cost for room. Thus if a hotel cost €80.000 per room to construct and furnish, the average selling price of the room should be €80.00

Limitations: this rule of thumb is somewhat archaic in today’s world and totally ignores consumer perception and demand. It should be used more at starting point than anything else.

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Method of Inflationary Calculation

In this case the price is achieved by increasing the amount of the last year by some points of percentage according to the inflation.

Limitations: It takes into account the increase of costs but, it doesn’t consider the market at all.

Further, this method shows the customer only the increase in price, without verifing an improvement in the quality of service.

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Empirical Methods (or market and competition oriented)

Competitive Pricing; Perceived- Value Pricing; Expectation Pricing; Psychological Pricing.

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Competitive PricingThis cannot be considered a real strategy

but an habit of several hotelkeepers to set their prices at the same level of the competitors. Basically, prices are set to the level of the strongest competitor in order to defeat it on pricing.

This strategy has been adopted from the firms that are not market leaders, but based just on the idea to offer lower prices than other competitors.

Limitations: this method brings a levelling of prices and services and results in an impoverishment of overall offers available in the area.

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Perceived- Value Pricing Perceived-value pricing uses the buyers’ perception of

value, not the seller’s cost, as the key to pricicing. Researchers ask buyers how much they would pay for a

hotel room with and without certain amenities. This information provides an idea of which features add more value than they cost.

A successful guest price mix depends on careful study of the behavior profiles of major guest segments. For most hospitality companies, this begins with a separation of guests into leisure and business segments.

Undoubtedly, the most important distinguishing profile characteristics of these two major segments is their relative degree of price elasticity. In general, business travelers exibit a inelastic price behavior and leisure travelers an elastic price response.

Limitations. This method can set a price too high or too low according to the interpretation of demands made.

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Expectation Pricing The reference or expected price is that consumers

have in mind, is based on some kind of prior experience or knowledge. Reactions to prices will vary around this pricing.

The research says that customers’ satisfaction occurs when the actual experience is equal or greater than that which is expected.

Thus, contrarily, consumers would be also satisfied when the price paid is the same or less than that which he or she is expected to pay for what was received.

Limitations: It is very difficult to understand in a correct way the right expectations of demand and this brings the need for continues research of the different segments’ expectations.

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Psychological Pricing Psychological pricing considers the psychology of prices, not

simply the economics. There exists a relationship between price and quality, for this reason prestige can be created by selling products and services at a high price.

Another aspect of psychological pricing is reference prices; these are prices that buyers carry in their minds and refer to when they look at a given product.

Another psychological pricing technique is called price-lining. This technics groups prices togehter so that a perception of substantially increased quality is created. For example, a wine list might have a group of wines in the €8 to €10 range and have the next grouping in the €14 to €16 range.

Still another version of psychological pricing is called odd numbered pricing. This is a familiar tactic. Items sell at €6.99 rather than €7.00 to create a perception of a lower price. This tactic is often used in menu and hotel room pricing.

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The Hotel’s Rate: A Definition

A rate can be defined as the purchasing method of a service sold in a certain period of time; further, it defines the kind of customers that will use this service.

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An efficient rates’ strategy In order to set a reliable rates’ strategy you need

to attend to the following points:1. What is the rack or standard price?2. What discounts should be offered?3. How will prices vary among different markets?4. How often should prices be changed?5. What impact should timing have on pricing?6. What prices should be set for various facilities

and services?7. Should prices be unbundled for different parts of

a service package? What prices should be charged to non guests?1. Should each item cover costs or produce a

profit?

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1.The creation of a prices’ list In order to create an efficient price list there are

some rules to follow:1. It should have a graphics layout consistent with

the image of the hotel, for this reason it must be realized from a graphic;

2. The price list should be reprinted every year, so, one can change some photographs in order to present new services offered

3. It should be printed in different languages, and should not be printed just as an edition in four languages;

4. The photos must communicate the atmosphere of the hotel, in order to have a powerfull effect, for example – include people instead of showing just empty places;

5. The paper should be heavy weight; preferably a good quality better cardboard;

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2. The Creation of a Prices’ List6. The price list should be easy to read and

pleasant to see;7. The special offers and discounts should be

highlited using colors and graphic;8. The prices’ list should be targeted to different

segments of customers; in case the hotel has two different kind of customers, it would be better to prepare two different kinds of the price lists;

9. The prices list should be the same as the method of communication adopted;

10. The prices’ list should contain various methods to promote low season and difficult periods, with attractive phrases such as: (“a surprising stay”; "a golden autumn…” etc.).

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The Prices’ List: Concluding Remarks It should be remembered that different

types of rooms should be on the price list.1. They must be clearly highlited and to

achieve this goal one can use different colours and symbols;

2. One can use pleasant names, that refer to the identity of the hotel or that refer to items in the surrounding area;

3. One can adopt names that reflect the level of quality offered;

4. They should be well presented with indication of services and features offered at the hotel.

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The Prices’ List: An ExampleKind of RoomKind of Room OccupancyOccupancy

SingleSingleOccupancyOccupancyDoubleDouble

StandardStandard €€150150 €€235235

SuperiorSuperior €€180180 €€270270

De LuxeDe Luxe €€200200 €€300300

Junior SuiteJunior Suite €€320320 €€320320

SuiteSuite €€360360 €€360360

The different kind of rooms must be explained.

The rates offered are inclusive of Room + Breakfast+VAT+Taxes and ServicesOne should explain all the different services offered.Check-out time: at 12.00.All different types of Credit Cards are accepted.

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A Potential Pricing StrategyTwo-tier Pricing Pricing MethodsDecisions Cost-Plus Rate of Return Method Primary Pricing Going Rate Decisions Method

Secondary Contribution Margin Pricing Method Decisions

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Yield ManagementPrinciples & Concepts

Yield ManagementPrinciples & Concepts

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Summary

General presentation of Yield Management The application to different industries The main concepts and techniques

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Why use Yield Management ? Structural changes :

More competition More capacity Market more sensitive to

price and more segmented A trend towards

deregulation

Increasing load factors but decreasing yields. Results IATA for 1993 to 1999 :

+ 47,3 % in traffic - 7,0 % in yields

Source : The Economist

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A Definition

Yield Management is the practice of maximizing profits from the sale of perishable assets, perishable assets, such as airline seats or hotel rooms, through a combination of pricing and inventory controlspricing and inventory controls.

Synonyms of YM are : Revenue Management Real-Time Pricing and Inventory Management

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YM is applicable in different industries

Airline seats Hotel rooms Advertising space Railway seats Tour Operator packages Car rentals Utilities (electricity supply...) Retail stores

The resulting value of all these products

will be zerozero if they arenot sold on-time

81

Airlines E-commerce

Financialservices

Telcos

Health

Automotive

Power supply

Distribution

Transport Media

Freight

Hotels

Carrental

Touroperators

1980 1985 1990 1995 2000

Installation Rate (estimate)

± 80%

± 20%

< 1%

A discipline poised to explodeA discipline poised to explode

82

YM involves both price and capacity

Better match supply to demand

SchedulingPlanningOverbooking

Price stimulationFare differentiationSupplySupply

DemandDemand

83

The Optimisation CycleThe Optimisation Cycle

- 3 Years - 1 Year - 6 Months - 3 Months Check-in

Tactics / Scheduling and pricing• Flight schedule• Fares and conditions• Allotments

Operations / Yield and capacity adjustment• Increase/decrease capacity• Close/open sales quota

Strategy / Development• Fleet definition• Property acquisition

84

YM Performance Indicator (Hotels)YM Performance Indicator (Hotels)

REVPAR

RevenueRevenueperper

AvailableAvailableRoomRoom

Yield Management OptimizesYield Management Optimizes REVPARREVPAR

L.F.

Load Load FactorFactor

REVPOR

RevenueRevenueperper

OccupiedOccupiedRoomRoom

85

YM Performance Indicator (Airline)

The same performance can be obtained through different load factors and fare policies

A yield indexyield index can compare actual result to maximum theorical result :

100 % LF x MAXIMUM FARE

R / AS LF (%) R / OS

350 $ 60 % 583 $

350 $ 70 % 500 $

350 $ 80 % 437 $

Revenue per

Available seat

Revenue per

Available seat

==Load Factor

Load Factor

Revenue per

Occupied Seat

Revenue per

Occupied Seatxx

86

Each application of YM is unique

The ConceptsConcepts of Yield Management are identical for any service company

Its ApplicationsApplications differ significantly between companies

The analysis of the Sales CycleSales Cycle allows to point-out key differentiation criteria between companies

87

Hospitality Characteristics The Market is Huge …

356 000 hotels 15 millions of rooms 3,6 Billions of night stays 1,6 Billions of reservations

…but fragmented Independents : 85% of hotels for 65% of rooms Chains (300) : 15% of hotels for 35% of chambres

…with a variety of management schemes Independents Management Contracts Franchised Associations : Best Western, relais du

silence Chains

88

Market Size

Hopitality has the strongest potential for growth

Distribution Channel

Many Intermediaries Many systems, often not properly

interfaced, and technologically obsolete

Many « fees » affect RevPAr

Client Travel Agent GDSs Switches HotelCall Center

Rate$100

Commission$10

Booking fee$3.5

Booking fee$2.5

Managementfee $4

Net Revenue$80

$20

90

Customers Travel Agent GDSsAggregators& Switches

PropertyManagement

Systems

Hotel ChainsCentral

Reservation Systems

Direct (Phone, email, fax, hotel website, …)

Direct (Phone, email, fax, hotel website, …)

Online TravelAgents

Brick & MortarTravel Agents Switches

Regional/local On-line

Aggregators

SabreGalileo

Worldspan

CRO Call Center

91

Hotel Specifics PMS’s are THE source of

information for both fares and availability Several PMS’s may coexist for one

given hotel chain

The CRS is the « marketing » center Availability and fares may not be

as accurate as in the PMS’s All distribution channels may not

have access to the PMS’s and they may not have access to all available fares and to true availability

Capacity control is decentralized

CRO Call Center

Hotel Chains Properties

CRS

PMS

PMS

PMS

92

Few Standards

15 CRS : Rezsolution, Xenon… 60 PMS : Fidelio, Hogatex… A few « PRS » : Opera Switches (mere connections to GDS’s, with little added

functional value) : Pegasus, Wizcom

There is no IATA for the hospitality

93

Hotels versus Airlines Length of Stay Control versus O&DLength of Stay Control versus O&D

O&D are more numerous than LOS, but… …Early departure and unexpected stay overs during a flight are not

recommended

Hotels have yet to embrace the fencing conceptHotels have yet to embrace the fencing concept Few Apex or senior/youth fares Bargaining skills of guests can make a big difference Hotels communicate on highest rates…not on lowest

Airlines are more flexible in adjusting capacity Airlines are more flexible in adjusting capacity Hotels can’t fly to where customers are waiting A new hotel cannot open suddenly to cope with excess demand

94

Preconceived ideas ...

Assume an hotelier wants to improve the yield of a standard room which usually sells at 80 € the night …

80 €80 €

His first idea will be to improve the comfort of this room…After Works...

After Works...

200 €200 €

95

And reality ...And reality ...

However, if this hotelier cannot sell this room anymore, because it is too expensive for his usual guests, the investment made has served nothing … .…but make him bankrupt !!

96

How to sell hotel rooms...How to sell hotel rooms...

The basic principle is to sell rooms according to demand and not according to the level of comfort

ComfortComfortDemandDemand

97

Facts …

2. The marketing people like innovation : new markets, new products, new fares, marketing campaigns… all the better if it serves the revenue optimisation objective…

1. The reservation office answers all reservation requests and try to accomodate them, without necessarily applying all restriction rules …

1. The "corporate" department will try to negotiate as many room nights as possible

1. The Hotel management makes more or less realistic rolling forecasts, under the pressure of the owner or the headquarter…

98

And Problems

Conflicting objectives A marketing campaign is

launched when the hotel has no roomno room available

Group bookings produce high spillhigh spill of individual demand

The front desk is faced up with high walk outwalk out rates due to excessive overbooking

…

The human factor A clever reservation manager

can have a good picture of his hotel business for the next two months

But he certainly cannot consider allall parameters for the whole year to come

Besides, making a good forecast is dependent on the « living « living memorymemory »» of the hotel

99

How to do well ?How to do well ?

A good forecast must integrate two things

EnvironmentEnvironmentAnalysisAnalysis

HistoryHistoryAnalysisAnalysis

Data must be relevant to the hotel and to its environment

100

HotelHotelStrategyStrategy

A goodA goodForecastForecast

Intuition is replaced by a scientific blend of probability calculation

and capacity optimisation

ConceptsConcepts

* A good optimisation must produce recommendations based on :

101

A group A group MaterializationMaterialization

analysisanalysis

Forecast ofForecast ofIncrementalIncremental

DemandDemand

ConceptsConcepts

* Accepting or denying a group business can be made after an economic trade off between group requests and future individual bookings :

102

A three part play

Capacity Demand

Revenue

Revenue Management Price

Optimization

What guest will

book when?What

price for a given

capacity?

What capacity for a given price?

Forecast

103

The different controls used in YM Pricing

If price is flexible Fare/Rate availability control

If multiple fares are offered Open/close or booking limits (sale quotas)

Alternate availability if multiple flights serve the market or if alternative

dates/accomodations are possible Overbooking - Capacity management

If capacity is limited and reservations cancel or do not show-up Origin and Destination Control or Length of stay

for multileg flights or hubs or hotel stays Reservations Control

80 % of the time of yield analysts... Group Quotations

104

ComponentsComponents

DataAnalyzer

Models &forecast

•Time series•Long term•Dynamic forecast

Daily capture

Optimisation

DealQuotation

DealQuotation

Centralised ReservationSystem

• Reservations• occupied rooms• Revenues• denials

Front-Office

• Booking limits• Overbooking• length of stay

RecommendationsRecommendations