Issues In Revenue Management

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Management Issues Related to Revenue Management

According to Robert Cross, the pioneer of airline revenue management (RM), “Revenue Management ensures that companies will sell the right product to the right customer at the right time for the right price”.
Revenue Management executes the fundamental standards of supply and demand economics in a strategic manner to produce incremental incomes. There are three vital conditions for income administration to be material:
• Fixed amount of inventory available to be sold.
• Inventory is perishable in nature. There is time limit to sell the inventory.
• Those diverse customers are ready to pay a different price for utilizing the same room. Hotel implement distinct profit managing processes to attain
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Traditional business hotels could have three primary distribution channels: hotel direct, central reservation systems and travel agents. A distribution channel is defined as mechanism that provide “sufficient information to the right people at right time in the right place to allow purchase decision to be made and also allow the consumer to make a reservation and to pay for the required product”
Distribution has become a crucial part for the marketing mix. Cornell University (2010) identified in their research that approximately 40% of bookings come from website, 30% from Global Distribution Systems (GDSs) used by travel agents and online agents, and the rest 30% from a mix of other sources. The importance of effective GDS channel distribution management is crucial, however “it is often the least one management knows about and fails to maximize revenues through this channel.” (Raven et al.,
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These costs can not quite the same as offering it specifically through the online channel, the hotel site or hotel front desk. According to Green (2006) distribution costs can sometimes be as high as 25% of hotel revenues. The capacity to oversee and specifically utilize a large number of channels is the new focus of hotel managers who now focus on the most proficient method to best select and work with outsider delegates and channels as opposed to endeavouring to kill them. Mostly revenue managers utilize high cost channels as a part of request to accomplish high occupancy, so they must be extremely cautious about the quantity of high cost channels they choose. For instance, if hotel has normal occupancy rate of in excess of 90%, the revenue manager would likely not to utilize high cost channels to fill the hotel’s rooms; they would rather spare rooms for a last minute walk-ins when they find themselves able to charge a premium for the
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