Chapter 8 - Revenue management for hotels. In this chapter, you will learn how hoteliers decide what they will charge for the hotel rooms and the other products they sell. You will discover that hotels typically offer their guests a variety of room rates depending upon the specific characteristics of the rooms sold and the guests to whom the rooms are sold. | Chapter 8 Revenue Management for Hotels Establishing Room Rates Revenue Management Non-Room Revenue Chapter Outline Learning Outcomes Utilize alternative methods when establishing a hotel’s room rate structure. Apply revenue management and analysis techniques to the administration of a hotel’s room rate structure. Recognize the importance to a hotel of properly managing and controlling its non-room revenue. Establishing Room Rates Any serious exploration of hotel room rates and their management must include basic information about room rate economics. Room rate economics recognizes that, when the supply of hotel rooms is held constant, an increase in demand for those rooms will result in an increase in their selling price. Conversely, when supply is held constant, a decrease in demand leads to a decreased selling price. Establishing Room Rates Understanding the law of demand is critical because, unlike managers in other industries, hoteliers cannot increase their inventory levels of . | Chapter 8 Revenue Management for Hotels Establishing Room Rates Revenue Management Non-Room Revenue Chapter Outline Learning Outcomes Utilize alternative methods when establishing a hotel’s room rate structure. Apply revenue management and analysis techniques to the administration of a hotel’s room rate structure. Recognize the importance to a hotel of properly managing and controlling its non-room revenue. Establishing Room Rates Any serious exploration of hotel room rates and their management must include basic information about room rate economics. Room rate economics recognizes that, when the supply of hotel rooms is held constant, an increase in demand for those rooms will result in an increase in their selling price. Conversely, when supply is held constant, a decrease in demand leads to a decreased selling price. Establishing Room Rates Understanding the law of demand is critical because, unlike managers in other industries, hoteliers cannot increase their inventory levels of rooms (supply) in response to increases in demand. Hotel managers must also understand that their own inventory of rooms is highly perishable. If a hotel does not sell room 101 on Monday night, it will never again be able to sell that room on that night, and the potential revenue that would be generated from the sale is lost forever. Establishing Room Rates A rack rate is the price at which a hotel sells its rooms when no discounts of any kind are offered to the guests. In some cases, it makes sense for hoteliers to create special event rates. Sometimes referred to as “super” or “premium” rack, these rates are used when a hotel is assured of very high demand levels (., Mardi Gras in New Orleans and New Year’s Eve in New York City). Hotels often negotiate special rates for selected guests. In most cases, these negotiated rates will vary by room type. In addition to rack and negotiated rates, hotels typically offer corporate rates, government rates, and group rates. Establishing Room .
