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RevPar - Revenue Management

 
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dgenaldo@socal.rr.com
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MessagePosté le: Dim 12 Oct, 2003    Sujet du message: RevPar - Revenue Management Répondre en citant

Hello,

This will be in English. Please reply in English ... I do not understand French.

I have been a Sales Manager for the Marriott Vacation Club International and the Radisson Hotel in California, USA. for over 4 years. All these years I have always tried to understand the meaning of RevPar and how that is developed or established. My director always dismisses my questions, saying that it does not have anything to do with my work. This stifles my growth in the company. I tried going to Revenue Management Classes and somehow cannot find the classes that can be taught after work hours here in California.

Please explain to me what RevPar is and how that is established. Is there a website class that I may be able to enroll in to learn Revenue Management and Yield?

Help me!

Daisy Genaldo
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Tomtom



Inscrit le: 28 Sep 2003
Messages: 64
Localisation: Paris 8

MessagePosté le: Dim 12 Oct, 2003    Sujet du message: Revenue per available room Répondre en citant

Hi Daisy, Hello from Paris

The RevPar is the total daily revenue (room only) / the total number of rooms. The AVR is the total daily revenue (room only) / the number of sold rooms. The mean of the RevPar is to evaluate the average revenue per built unit.

If you have an excellent AVR with a poor occupancy rate, or vice versa, this means a poor RevPar.

You may also have heard about RevPac : revenue per available customer. The number of units is replaced by the number of beds.

Feel free to ask anything else
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MessagePosté le: Lun 13 Oct, 2003    Sujet du message: Re: Revenue per available room Répondre en citant

Hello Tom,

Thank you for the answer on RevPar in the RevDev Forum. With your answer, then, here are a few more questions:
1. How do I evaluate revenue if we have revenue from banquet, meeting rooms rental and catering in the hotel?
2. If the revenue from Catering does not affect the calculation of RevPac or RevPar at all, what formula includes catering revenue?
3. Is Revenue Management supposed to also watch revenue from Catering closely or is the revenue from Sleeping Rooms the only factor that matters in establishing and monitoring the success of a Hotel?

Daisy Genaldo
dgenaldo@socal.rr.com
(714) 639-3937
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Tomtom



Inscrit le: 28 Sep 2003
Messages: 64
Localisation: Paris 8

MessagePosté le: Lun 13 Oct, 2003    Sujet du message: F&B Répondre en citant

Hi Daisy,


You are perfectly right about those ratios. If you could read French, you would see all questions and answers about revenue/yield management applied to F&B issues.

Most of the time, RevPar and Revpac are used for room only. Some people are also including other revenues such as green fees, catering, banquet, bar, restaurants...

The fact of knowing the average total revenue per room or per customer does not really help to yield. Revenue Management is usually applied to room dpt only because of its regularity : the capacity doesn't change much, it is usual to sell the same room at different prices depending on the channel. For F&B, it is unusual to sell the same banquet at different prices or even with as much difference as rooms. Without the tools to evaluate the inventory and the demand, it is rather difficult to have a revenue management strategy on F&B.

Room revenue is not the only factor to establish and monitor the success of a property. This is the only department where a yield strategy is implemented. Nevertheless, you can yeild on room/package price for channels using F&B.

You will probably get other answers on this forum.

Cheers
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THB - RevDev



Inscrit le: 06 Sep 2003
Messages: 381
Localisation: Paris - France

MessagePosté le: Lun 13 Oct, 2003    Sujet du message: RevPAR & Yield Répondre en citant

Hello Daisy + TomTom : RevPAR calculation is that easy :

room revenue divided by the number of existing rooms on a given period ------ or ------- ARR (average room rate) X occupancy %

The purpose of the RevPAR calculation is to evaluate how the hotel performs against its fixed capacity and consequently its related fixed costs.

Occ % and room revenue are directly linked to hotels capacities. Most of the time, ARR and Occ optimizations are inversely proportional to each other. So that you can use RevPAR ratio in order to compare your performance against competitors independantly of their capacity.

Calculating your fixed costs per existing room, enables you to combine them with the RevPAR in order to calculate a 1st basic gross profitability ratio. This gives you a better idea of how important vacant rooms are to the profitability scheme (how much it costs). In the mean time, you'll be able to calculate easily a distress or a hurdle rate and your gross rate of profitability.

Of course RevPar has to do with your work Daisy. As a Sales Manager, you are supposed to be more commited than involved in the revenue management process, that leads to : sell the right product at the right price to the right customer at the right time. This process impacts directly the hotel profitability and you are perfectly right investigating on it.

A far as I know, there is no web classes or after work courses available on the market. Nevertheless you could read somme Y.M. publications apply for Cornell University summer courses or regional seminars, contact some North American specialists such as : http://www.buckhiester.com ....

Your other questions and TomTom's comments :

Feel free to calculate different RevPAR according to your needs and in relation to your operation : room only, hotels guests revenues, global revenues, revenue from NON hotels guests, etc

I do not recommend to follow directions based on RevPAC unless you are really a specialist. The "available" number of guests is subject to change and the concept of cost per guest is hardly applicable.

The optimization process depends on what the priority is to be given. For instance, in a resort with HHH, the profitability of the HHH is higher than the hotel one. So that you give priority to gamblers reservations at the hotel. When your demand forecast exceeds the capacity, you can sort out the demand according to the room rate, to the potential extra revenue and to the sales strategy as well. It is a normal process to manage group options in relation to their potential extra revenues (meeting rooms, F&B, etc). It is not rare to offer a meeting room or hotels rooms when quoting residential seminars demands. You can also propose alternate dates for rooms or meeting rooms availability reasons or in relation to demand forecast in a segment of a higher rate contribution. Y.M. in the hotel operation is very different from Y.M. in a single restaurant. Most of the time, the optimization process includes (or should include) extra revenues according to the forecast, the different availabilities and demands.

One of the key factors that matters in establishing and monitoring the success of a hotel is the ability to increase RevPAR while decreasing costs, this revolves around all revenues and all costs you can play with.
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Thierry Blottin
Hotel Yield / Revenue Management
http://www.revdev-consultants.com
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MessagePosté le: Ven 17 Oct, 2003    Sujet du message: RevPar - Revenue Management Répondre en citant

I calculated our hotel RevPar for the month of September. Our hotel has 335 sleeping rooms. The numbers I came up with are the following:
ADR = $74.40 and an occupancy of 45%
RevPar = $ 43.57

In this economy, would you consider this revpar to be low? what do you use as a rule of thumb to determine whether the hotel is running at an average or losing? how would you measure a hotel's success?

With the occupancy rate that we had in september, would you say that the revpar of $43.57 is okay?


Please help!

Daisy
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THB - RevDev



Inscrit le: 06 Sep 2003
Messages: 381
Localisation: Paris - France

MessagePosté le: Sam 18 Oct, 2003    Sujet du message: Your hotel case Répondre en citant

The default rePAR is room only so that you can easily compare with competitors. Your revPAR is 33.48 and I suppose that you got a 43.57 inclusive of extra revenues even if it's not indicated, otherwise the calcutation is wrong. If yout=r calculation take extra revenues into account it means tnat you achieved 23% of your total revenue in extra revenues ond 77% in rooms revenue. I don't know anything about your property, outlets, category, etc. If you did that with 1 restaurant or with 7 + 10 000 m2 of banqueting areas in 2*,3*,4*,5* stars is very different.

I don't now anything about detailed US hotels economy and have no means to compare and to analyse against your competition.

A rule to determine whether the hotel is running at an average or losing or to determine a hotel's sucess depends on many other criterions than revPAR and should be analized through operationnal and financial reports. Nevertheless should you access the GOP (gross operation profit), this ratio should be of help for you in the hotel's performance understanding.

Citation:
With the occupancy rate that we had in september, would you say that the revpar of $43.57 is okay?


I really don't know. A starting point could give you an idea, it might be to compare revpar against usual rack rate (if it's not over or under estimated, related to the market and hotel's costs). Lets suppose that your Rack is $75, you performed very well in ADR on the other hand if the rack is $200, it's self explanatory ... It means that wether the rack is not realistic (too high regarding the value for money offered) or that there is sales & mkg or economic issues.

If your rack is $75, you got 5528 empty rooms in Sept. You might be more flexible on rates in order to have those empty rooms sold. Lets say that you manage to sell (on other markets, segments, distribution networks) only 50% of the 5528 empty rooms at an average rate of $35 (without undercutting actual contracted rates and according to the "image" of the hotel, brand policies, etc), your figures will be quite different : ADR : $51.75 OCC : 83%, revpar rooms : $43, ttl revPAR : $53. The potential is huge, this is a $96 740 and extra revenues related to the inncrease in OCC are not taken into account.

If your rack is $200, there is still a potential in OCC, but maybe the rate structure is not adapted to the product, the sales strategy, the market, the economic or competitive environment, etc and you should reconsider it in order to answer the need of potential customers. This could be a reason to the lack of OCC, ADR and consequently of revPAR.

Daisy, I really don't know if the answer have been of any help. This is a very general information and not a detailed consultancy analysis. So let us know if you need some more info.
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Thierry Blottin
Hotel Yield / Revenue Management
http://www.revdev-consultants.com
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Zorm



Inscrit le: 22 Sep 2003
Messages: 347
Localisation: Sur le Net

MessagePosté le: Sam 18 Oct, 2003    Sujet du message: Hotel's results Répondre en citant

I agree with THB and it is not easy to give you an advice from 3 figures.
There could be a seasonality problem as well. Many hotels and specially resorts have business and leisure demands and seasonal segments. Many resrts are closing during a certain period of time during low season. I don't know if your hotel is a resort, please let us know.
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MessagePosté le: Dim 19 Oct, 2003    Sujet du message: RevPar - Revenue Management Répondre en citant

I am sorry for not being a little more informative when I asked the question. I realized after I asked it that it was not fair to throw out 3 numbers without giving a history of the hotel.

First of all, I would like to thank Thierry and Zorm for the answers. I truly am learning a lot through this forum ... thank you so much!

The hotel is rated 3-stars, has 335 rooms, 4 (large 2-room) suites, 22,000 sqft of banquet/meeting rooms, a restaurant, 2 competition tennis courts ... but is not considered a resort.

On a regular month, 65% of the sleeping rooms are tied into the banquet and catering services of the hotel. The Rack Rate is $189 on good months - April through August, and $139 on other months. Occupancy % from Arpil through August runs from 69 - 93%, but can hardly make 55% on slow months.

The 43.57 which I thought was the RevPar is an error because ( you are right), I took the total revenue in the report that comes to us from the Front Desk. It must have had Catering numbers in it.

As a sales manager i find it very difficult during these times to face such a strong competition. When the Visitors Bureaus of our city gives us leads and I quote a low rate of $79.00 per night with 2 full breakfasts included, knowing that at this time our ADR is $139.00 ... I will find out later that we lost our bid to our next door neighbor hotel who bid $69.00 with Breakfast too! It is such a bitter competition going on now that in order to allow the hotel to survive, I have to beat the competitors with a lower rate. But how low can I really go without jeopardizing our ability to pay bills.

Now that I explained more stuff, is it a bit easier to make more sense of the numbers?

I really appreciate any feedback from any of you.

Daisy
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Zorm



Inscrit le: 22 Sep 2003
Messages: 347
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MessagePosté le: Mar 21 Oct, 2003    Sujet du message: Jeopardizing our ability to pay bills Répondre en citant

Sorry for just a very short answer, but I am in a hurry today.

Citation:
But how low can I really go without jeopardizing our ability to pay bills.

Of course it's always better to sell high rates, but sometimes it's better than nothing to cover yout costs and get the bills paid.
Let's suppose that your fixed costs are $50 per room. If you sell $51 you have a "gross profit" of $1, you sell $50 = break even, you sell $49 I agree with you, you loose $1, but you cover your fixed costs by $49 instead of nothing, and it's not too bad if you want to keep your ability to pay bills. It gives you time to make an other strategy, sales actions, etc
It's just jeopardizing our ability to invest into refurbishments, new features and so on.

65% of rooms tied to banqueting seems to be very high. Of course when this market slows down it's a big loss. Can't you have something else to develop in your market mix (for bad seasons or days)?

Are your competitors the same category and do you have some weaknesses regarding quality, refurbishment, services, etc

I'm really in a hurry, I have to go know, see you around tomorrow . brgds
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THB - RevDev



Inscrit le: 06 Sep 2003
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Localisation: Paris - France

MessagePosté le: Mar 21 Oct, 2003    Sujet du message: Alternative markets or distribution channels Répondre en citant

Hello, Daisy, thank you for your information, it helps.

Zorm told you about alternative markets, does your hotel have this possibility ? Do you have a distribution channels strategy, through reservation web sites or booking engines ? Are you branded or independant, and if so, what's your brand doing for you at the moment and for distress periods.

The problem seems to be a very strong competition and low demand. It could be in relation to the product itself versus competitors ??

Maybe, you could try to beat them thanks to an upgrade strategy : offer more value for the same amount in your quotations. If you have different room classes (do you ?), you could offer superior rooms instead of standard ? Or other costless services such as extended departure time, early checkin, free banqueting amenities if you have your own, such as video or overhead projectors, etc.

On the other hand, depending on your competitors and on the market, we could imagine that if they beat you on quotations at $69, they have banqueting capacities. Let's imagine that you let them fill their capacity at such a rate. Once they are full, you could get the business they cannot accomodate for capacity reasons, and at a higher rate. That's risky, but we never know, there could be someting to do this way ??

Your banqueting capacity is important in comparizon to your 335 rooms, nevertheless I would say that 65% of your market mix linked to banqueting is not a "mix" anymore. In case of defection of your 1st markets / segments, you are in trouble, maybe you should balance the mix if there is something else to develop as Zorm said in his previous message ?
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Thierry Blottin
Hotel Yield / Revenue Management
http://www.revdev-consultants.com
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MessagePosté le: Ven 07 Nov, 2003    Sujet du message: hotels Répondre en citant

hello again!

My husband, daughter and I are going to visit my son in England this December. We are going to London on December 26, 2003 and coming back to the United States January 6th, 2004. My children want to go and visit Lyon, France for New Year's Day. We might fly to Lyon on 30 Dec and stay there until 2 Jan.

Can you please tell me how far Lyon is from Paris? Are there many places to go and visit in Lyon? I am excited about this trip because this will be the first time we go to France. We have been to different parts of Europe before, but not France. I was thinking that if Lyon is not too far from Paris, we may be able to take a bus ride (day trip) to Paris too. Are any of you in this location? It would be nice to be able to meet a hotel executive over there.

I know that this may not be the right place to go for these questions, but I feel good about all of you trying to help me on my Yield Management questions that I feel like I belong to your group too!

I do hope that anyone of you may guide me on where to go and where to stay and what to avoid in France.

Thank you for any advise.

Daisy Genaldo
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THB - RevDev



Inscrit le: 06 Sep 2003
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Localisation: Paris - France

MessagePosté le: Ven 07 Nov, 2003    Sujet du message: Hello Daisy Répondre en citant

Hello Daisy, welcome to France.
Lyon is a very nice place to visit indeed, good choice. I used to work over there several years ago and I like it very much. Its located 400km away from Paris in the south of France. Nevertheless there is a high-speed train called TGV between Lyon and Paris. Travel is 1h55 for 50 Euros. There is many independant charming hotels as well as international branded properties.
The best place to stay in Lyon is in city center close by "Place Bellecour" between rivers Rhone and Saone. Depending on your budget. The "Vieux Lyon" area is definitely a place to be visited if you get there. Almost every place of interset are walking distance from Place Bellecour and there is a subway and many buses aswell. Avoid suburbs, but most of nearby towns and villages are nice. Ask for information and direction to the Hotel and specially for your New Years Eve "Réveillon" Dinner réservation. Taste French cuisine and wines. Things to avoid, hum .... French people are very nice, but do not assume that everybody speaks English (outside of the hotel), ask them first. Get information prior to arrival and don't be too much the typical "please help me, I'm lost, I don't understand, is it safe, can I drink tap water, how many blocks is the museum, the room is so small, where is city center". You'll find people more helpfull if you take care of yourself.

Some places of interest in Lyon are : Place Bellecour - Vieux Lyon - Musée Saint Pierre - Musée des Beaux-arts - Parc de la Tête d’Or - Quartier Saint-Jean - Péninsule du Rhône et de la Saône - Maison des Canuts - Théâtre des Célestins - Bâtiments de la Renaissance - Musée des tissus, etc

RevDev Consultants is based in Paris, but infortunately, I won't be there for NYE, I'll spend it abroad. But maybe some other forum members ....
I wish you to enjoy your stay and do not hesitate to get back to us, should you have more Yield matters to share on this forum.
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Hotel Yield / Revenue Management
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