Originally Posted by
uElliots
understanding that you were giving us the 40,000 foot version, thank you
my 40,000 foot question based on the above is
total revenue, each room having some sort of occupancy no matter the rate would increase total revenue, would it not?
occupancy, again, each room would increase occupancy correct?
each room bringing in additional revenue would increase revpar right?
for example, if you had 100 rooms and each were at your rack at 100 dollars then you would max out at a revenue of 10000 dollars, with a 100% occ rate and a revpar of 100
if you had 60 rooms at 100 dollars and thats it then the rev would be 6000 dollars 60% OR and a revpar of 60 per room? is this correct
so why not have 60 at 100; 20 at 75 and 20 at 50?
this would make it revenue of 8500, OR at 100% and a revpar of 85 or am i way out of whack here?
In theory, you are correct. In practice it is more complicated. The challenge facing any Revenue Manager is to obtain the highest possible yield whilst meeting occupancy targets and the brand expectations. In effect, we are trying to sell the right rate to the right person at the right time.
Also, the hotel will already have quite a large percentage of rooms reserved well in advance by segments like wholesalers/groups, conferences, etc. Tracking future demand and forecasting what I will have "on books" will result in rates moving up or down depending on seasonality, competitor positioning and several other factors.
For example, as occupancy increases and if demand is forecasted to be strong, the rate will move up as room categories are sold out. During weaker demand periods the decision may be taken to oversell lower room categories and upgrade/upsell upon arrival.
In short, the process is hard to explain in a few sentences, however striking a good balance between maximizing the rate and increasing occupancy levels is essential to a successful hotel operation.