Table of Contents
1. Introduction of Revenue Management 4
1.1 Introduction of Revenue Management 4
2. Total Hotel Revenue Management 4
2.1 Introduction of Total Hotel Revenue Management 4
2.2 Benefits of Total Hotel Revenue Management 5
3. Customer Centric Revenue Management 6
3.1 Introduction of Customer-Centric Revenue Management 6
3.2 Benefits of Customer-Centric Revenue Management 6
4. Limitations of THRM 7
5. Application on Resorts World Sentosa Singapore 8
6. Recommendations 9
6.1 Value of Qualified Revenue Management Personnel 9
6.2 Developing Unique Strategies 9
7. Conclusion 9
8. References List 10
Introduction to Revenue Management
1.1 Introduction to Revenue Management
The Revenue Management System uses econometric approaches and from the mathematical point of view, using specific methods focuses on the detailed forecast and on optimizing existing opportunities to achieve incremental revenue (Belobaba, 2009). RM targets at enhancing the performance of an organization by selling the right product or service to the right customer at the right time (Valerio et al., 2016). This approach is very dependent on uncontrollable external factors such as seasonality, consumer behaviour, demographics, travel recurrence, the purpose of the trip, the time of booking, the booking method (Petrus, 2014). Hence, the hotel is not the only industry that RM can be applied on, it is utilized in various industries such as airlines, restaurants, car rental, theme parks, theatres and much more as well.
Revenue management (RM) for hotels is the science of using historical data and present levels of booking activity to forecast demand as accurately as possible to maximize revenue as the rooms of the hotels are perishable assets (Inge, 1998; Smith, 1999). Revenue management is the attempt to sell each room to the customer who is willing to pay the highest price so as to attain the highest revenue (El Gayar et al., 2008). In order to succeed in this cutthroat industry, hotels must have strategic revenue management approaches that are able outdo the others. The use of revenue management significantly aided hotels in revenue growth. Furthermore, precise forecasting can also assist hotels in better staffing, purchasing and budgeting decisions (Weatherford and Kimes, 2003).
Nevertheless, while revenue optimization is vital for hotels, room-centric revenue management is not sufficient to achieve financial goals (Freed, 2012).
Total Hotel Revenue Management
2.1 Introduction to Total Hotel Revenue Management
In the survey of Kimes (2011) of industry professionals, the most recurring response concerning the future of RM suggests that RM would become more strategic in nature and that it would comprise all revenue streams within the hotel. In the past, hoteliers have been focusing on structuring their revenue management according to the room revenue. Revenue management research for hotels has been immensely focused on the rooms division and its associated problems up till now, particularly on price discrimination and overbookings.
As years evolved, with growth and development, the approach of total revenue management has emerged as an improvement of traditional revenue management. As Buckminster (2012) mentioned, Total Hotel Revenue Management (THRM) is “Managing every revenue source at every guest touch point to its maximum profitability for the entire hotel or resort asset”. It conveys the message to capturing the predominantly unexploited revenue potential sources related to the non-room revenue generating centers within the hotel (Wang et al., 2016). These include room division, food and beverage, meeting and function rooms, spa and fitness facilities as well as a casino to apply RM to effectively manage its fixed capacity.