Hotel Profit Discovery

21 Basic Revenue Management Questions That Can Only Be Answered With Math

I have had the opportunity to sit in yield/strategy meetings for many hotel companies and thus have been able to hear how RMs from every type of property brazenly use assumptions, hunches, and mental models to answer questions that have a precise mathematical answer.  For the most part, RMs still believe that they can “eyeball” and then mentally calculate most of the decisions that they have to make.  I don’t blame them, that’s the easy and expedient way to make decisions, but unfortunately it is also the most inefficient and even dangerous approach. Revenue Managers are still only slowly waking up to the fact that mathematical reasoning can be applied to an almost unlimited number of issues in the hospitality business. From rate setting to labor standards to pool chairs inventory, math can help you solve very complex, multi-dimensional problems.   When it comes to the day-to-day decision that RMs have to make, here are the top 20 questions that math can answer, yet are tipically answered by guesstimating.

1. By how much should I change my rates?  Is it $5, $10, $25, $100?

2.  How many groups should I except on any one day?

3. When  is the variance in pace significant enough to take action?

4. What should I charge my walk-ins?

5. How much of each bed type should I allow a group to block?

6. Should I mark up my bed types and by how much?

7. Is the pickup over X time period truly significant?

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8.  What is the floor and ceiling for my rate range?

9.  Has the demand/booking pattern changed and is it permanent?

10. Will we meet budget?

11. How deeply discounted should my negotiated rates be?

12. Which rate structure drives the most profitable guests?

13. Who in my database is most likely to respond to my email blast?

14. When should I drive occupancy and when should I drive rate?

15. What should my rack rates be for next year?

16. How can I generate more income further out in the booking window?

17. What discounts and promotions actually work and which ones are a waste of time and money?

18. When is it time to close the channel?

19. How much should I mark up with my premium rooms?

20. Which competitor’s price moves actually affect my demand?

21. What incentives should I offer to encourage loyalty?

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Robert Hernandez, Hotel Profit Engineer
Author Info: Robert Hernandez is an expert in the field of mathematical Hotel Optimization and Analytics. He has spent the last 17 years building data-driven forecasting and optimization models for companies in over 20 different industries, from tech to tourism. Robert possesses a very unique skill set including cross-disciplinary experience, advanced mathematical and analytics skills, data transformation, industry-specific knowledge and business-process improvement expertise. Robert began his career at the Walt Disney Company in Revenue Planning. Read More+


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