HFT471 Exam 3 reviewNEW INFORMATIONHSMAIdisplacement-Groupeval* (p62-73)• Rate offer assessment - ?• Displacemento Displacement is typically defined as one type of business being turned away in favor of anothero It is best known as Transient Displacement in which transient business is being displaced or turned away due to the acceptance of group businesso It is not only focused on transient business, displacement exists for group businesso A displacement analysis is a process that is used to determine the most valuable piece of business –  group vs. transient or group A vs. group B• Hotel displacement analysis (problem solving question)o NOTES- problem solving• Hurdle rateo The minimum rate or hurdle rate, is used as a guideline to know the lowest acceptable rate for a given nighto Best Available Rate (BAR): The lowest non-restricted rate bookable by all guests; the lowest rate available to the general public. BAR is designed to provide a recommended rate to be used with unqualified business, where there is no pre-agreed rate.o Last Room Value (LRV): is the maximum amount of room revenue that you can expect to make from the last room available for sale. The Last Room Values are determined during Reservation System Processing.o For example if the rate hurdle for Aug. 8th is $95 then all rates that meet or exceed $95 for Aug. 8th will be available This does not mean that a hotel’s rate structure includes a $95 rate, the hurdle is strictly used as a guideline for what should be available or not available for sale• Group analysis case study (problem solving question)o NOTES- problem solving• Last Room Availability (LRA)o LRA: If a commitment is given that whenever a room is available, the contracted rate will be given, even when higher rates are restricted.o For example, the RM restriction in place for a busy night when even at the highest rates ($225), a MLS two nights is required. If an LRA contract with a firm requests a room for one night at the contract rate of $150, the hotel has to take the booking; displaced revenue ($225x2=$450 – $150 = $300)• Run of House (ROH) Rates o Contracts are not specific to rates by room types: offering one rate regardless of room type• Dynamic pricing- ?• Contract evaluation: understand IDeas evaluation moduleo James Ruttley from IDeaS: It is not enough to look at revenue and room nights that a contract delivers. If the majority of room nights generated only stay on the busy nights of the week and the contract has conditions such as “last room availability”, the contract might not be delivering the “right revenue”. One of the most important decisions that hotels have to make each year is how to set rates and booking terms for contracted clients’ business such as corporate businessHFTRMHR • RM initiatives within organizations must take on three capitals: o Human, systems, social.• Revenue Manager – The Scope of the Positiono Responsible for the development, implementation and measurement of tactics designed to optimize revenue capture. Orchestrates group and transient pricing and distribution strategies.o Analyzes business trends, market economy and competitive landscape.o Manages group blocks. Approves all group bookings. Manages the efficient use of function space as it applies to group and catering.o Leads Weekly Strategy Meeting and other key meetings.o In order for the Revenue Manager to be successful they must be removed from the distraction of the day to day operation.• Responsibilities of RMo Assist Executive Committee during budgeting processo Work with Marketing Team to identify need periods o Work with Sales Team on group evaluations and leisure promotionso Complete and distribute financial reporting: Short and long term forecasting Key Metrics Results Performance/Forecast Evolutiono Inventory controlo Constant interaction with marketing and reservation staff• Skill set requirements of RMo The successful Revenue Manager possesses the rare combination of strong communication and leadership skills combined with well-developed analytical abilities.o The Revenue Manager wears a number of hats:  Police Teacher Analyst Strategisto Leadership and Team Building Skillso Problem Solvingo Business Statisticso Economics / Financeo Consumer Behavioro Hotel Operationso Comfort with Technologyo Current on Industry Trends and Informationo Passion• Possible organizational chartso SLIDES 17,18,19RMgolfCQ• Primary performance measure while implementing RM into a golf course- ?• Understand cost (FC vs. VC) and pricing structure of golf courseo Instead of measuring costs or revenue for a given daypart, should measure revenue per available tee time (RevPATT)o Golf courses have high fixed costs and fairly low variable costs, similar to hotelso Must generate sufficient revenue to cover variable costs and offset at least some fixed costso Low variable costs allow for some pricing flexibility and give operators the option of reducing prices during low-demand times• Demand for tee times is highly variableo Must be able to forecast time-related demand so you can make effective pricing and tee-time-allocation decisions to manage shoulder periods around high-demand periodso Special factor for golf courses is estimating length of time it takes parties to play• 2 levers of managing demand: o Duration management  To allow for better revenue-management opportunities, golf course managers must increase control over the duration of a customer’s round• Reduce uncertainty of arrival• Refine the definition of duration• Reduce uncertainty of duration• Reduce tee-time interval Duration should be measured by number of hours the player(s) is actually on the course Selling a round of golf essentially becomes selling a certain length of time on the course Must keep track of length of time that different types of golfers take to play (twosomes, foursomes, teenagers) and the percentage of time different tees are occupied during given dayparts• From these observations, we can determine the average round length and variationso Demand-based pricing• Methods of managing duration (see Exhibit 1)o Reduce uncertainty of arrival (internal vs. external measure)o Refine the definition of durationo Reduce uncertainty of duration (internal vs. external measure)o Reduce tee-time intervalo• No shows and slippageo Will customers with reservations do not show (no-shows) and how many