Exam 3 Things to Know The objective of Revenue Management is to sell the right product to the right customer at the right time for the right price thereby maximizing revenue from a company s products and services o In practice setting prices according to predicted demand levels so that price sensitive customers who are willing to purchase at off peak times can do so at favorable prices while price insensitive customers who want to purchase at peak times still can 4 Antecedents 1 Relatively fixed Capacity Predictable Demand Past History Checking Customer travel patterns Desired playing times How many players make tee times in advance How far in advanced what days Tournaments Pick up 2 Perishable Inventory 3 Appropriate Costing Structure Thought of as time High Fixed Costs and Low Variable Costs Like Hotels Golf Courses Airlines Highly variable demand Mornings Weekends Tournaments Holidays Important Ratios 4 Demand that is variable or uncertain o Profit Sales Expenses o Profit Margin profit sales o RevPar Room Revenue Total Rooms Available or Occupancy x Average Room Rate o Department Profit all of depatrment s rev all department exp o House profit or gross operating profit total department profit total of all exp departments OR Total Depart Profits Support Center Costs o Net House Profit house profit fixed expenses o COGS Costs of Goods Sales o Labor Cost variable labor fixed labor sales o Sales Mix sales of Item A Total Sales o Occupancy Rate Rooms Sold Rooms Available o Average Daily Rate Room Rev Rooms Sold o Breakeven Point Fixed Costs Sales Price Variable Costs o Return on Member s Equity Net Profit Total Member s Equity o Debt Ratio Liabilities Member Equity o Variance Actual Budget o Inventory Turnover Cost of Invent sold avg invent Do NOT need to know rate structures 7 core concepts or yield structures Know that realized means actualized actually got it Be able to look at a balance sheet pick out what s wrong analyze it and figure out what MOST LIKELY caused it o How we performed the budget good or bad Know 2 Revenue Management Slides and the Budget sheets emailed out
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