HFT471 Exam 3 review NEW INFORMATION HSMAIdisplacement Groupeval p62 73 Rate offer assessment Displacement another o Displacement is typically defined as one type of business being turned away in favor of o It is best known as Transient Displacement in which transient business is being displaced or turned away due to the acceptance of group business o It is not only focused on transient business displacement exists for group business o 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 rate rate for a given night o The minimum rate or hurdle rate is used as a guideline to know the lowest acceptable o 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 module o 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 business HFTRMHR RM initiatives within organizations must take on three capitals o Human systems social Revenue Manager The Scope of the Position o 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 RM o Assist Executive Committee during budgeting process o Work with Marketing Team to identify need periods o Work with Sales Team on group evaluations and leisure promotions o Complete and distribute financial reporting Short and long term forecasting Key Metrics Results Performance Forecast Evolution o Inventory control o Constant interaction with marketing and reservation staff Skill set requirements of RM o 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 Strategist o Leadership and Team Building Skills o Problem Solving o Business Statistics o Economics Finance o Consumer Behavior o Hotel Operations o Comfort with Technology o Current on Industry Trends and Information o Passion Possible organizational charts o SLIDES 17 18 19 RMgolfCQ Primary performance measure while implementing RM into a golf course Understand cost FC vs VC and pricing structure of golf course o 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 hotels o Must generate sufficient revenue to cover variable costs and offset at least some fixed costs o 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 variable o 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 periods o 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 variations o Demand based pricing Methods of managing duration see Exhibit 1 o Reduce uncertainty of arrival internal vs external measure o Refine the definition of duration o Reduce uncertainty of duration internal vs external measure o Reduce tee time interval o No shows and slippage o Will customers with reservations do not show no shows and how many customers in a reserved party will not show up slippage How to reduce no shows and slippage o Involve customers in arrival management external approaches and use operational procedures internal approaches to decrease