Advantages And Disadvantages Of Revenue Management
A1.b) Explain why revenue management is important to hotels and critically discuss the advantages and disadvantages for the organisation, its employees and customers.
Revenue is the total amount of sales achieved in a specific time period. Revenue is calculated as number of units sold multiplied by the unit price (Hayes and miller, introduction to revenue management, page3). Now managing of this revenue is revenue management. The concept of revenue management originated with the use of yield management in the late 1980 's (Bardi, chapter 6, page 173). Yield management during that time was widely used in the airline industry and the hoteliers decided to bring that concept into the hotel business to earn more profit. Hence, they created the reservation policies that could bring in more profit to their organisation. Now, we all know that rooms are a perishable product; they have a saleability of one day. Hence, the more rooms sold in one day earns to that much more profit for the day. Now with this new concept of revenue management, people were able to sell more rooms and
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Now what we use in the hospitality industry is a customer centric revenue management that can be defined as a revenue management philosophy that keeps in mind that the consumer gain is higher than a short term increase in revenue while making revenue management related decisions. Basically, revenue management is selling the right product to the right person through the right channel at the right time. Revenue management is a vehicle to help hotels to become aware of the rooms they sell, the rates at which they sell, and the pace at which they sell. It is a way hotels can become pro-active in the selling process, rather than simply posting rates and waiting for them to be sold
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