Hotel Revenue Management: Let Me Tell You What's The Best Formula

Hotel Revenue Management: Let Me Tell You What's The Best Formula

Original: Li Sheng


The meaning and purpose of revenue management

Hotel Revenue Management: Let Me Tell You What's The Best Formula

Basic principles of yield management

The top five

That is, hotel products can be used at best time

At best price. Through best channel

Sell to best customers

To maximize hotel revenue

What I said below

This is some analysis of underlying principles

May help you

Faster and more accurate determination of hotel revenue

Make timely adjustments


Best time


Separated by years

There are low and peak seasons. Divided by quarters

The structure of client source has changed. Divided by month

There is a fixed room cycle

Split by week. There are weekdays and weekends

Divided by days, there are periods of intensive and free time


Every time period

There will be certain rules. Pay attention to peak at any time

Draw a trend line as a general rule


Long-term comparison


Year, quarter, month, short term comparison

for example, week, day


Revenue Director

Data must be parsed accurately

Give scientific and sound advice

Separate shop

The general manager or sales director must make timely decisions

In order not to delay with possibility


Best Price


The pricing system must be complete and reasonable

One stop shop must be implemented effectively

In special circumstances, right to set prices should be exercised wisely


There should be price level recommendations


Individual visitors door-to-door

wireless network

Booking on official website or group channel

Frequent Flyer Program

Membership, agreement. A.B.C. Source for ordinary guests. Source for Special Clients


Price changes must be reasonable

My personal offer of daily price changes should be controlled at 15%

Holidays should be based on market conditions


Price changes must be approved in stages

The Chief Revenue Officer should direct and control


When using price leverage, consider emotions of customers


Continuous price changes should have a long cycle

Low frequency, small fluctuations


Optimal channel



Coefficient of contributions of various channels after deduction of commission


Loyal customers and members

Plan implementation details and feedback


At critical moments

Room Control Nodes


For channels

Analysis of data for previous period and same period compared to same period and compared to same period


with channels

Regular communication and feedback from responsible person


The most appropriate source of clients


Different regions, different hotels

Market Environment

Identification and cultivation of main sources of influence on customers


For major clients

Individual benefit analysis required


Importance of client source

The degree should be different depending on store

The situation makes recommendations

Sufficient rooms guaranteed

For example

Business hotel in TsKB

Different customer sources may have following deposit rates

Frequent traveler

Company by agreement, regular guest, OTA

Temporary FIT, entertainment guests, local sources, conference team

Team of travelers


Living area

And difference between urban and rural areas of outer ring

Client Sources may have following contribution rates

Frequent traveler

Local Source Client, Temporary Individual Client, Contract Company

wireless network

Entertainment source, conference team, frequent guest, travel team


Tourist attractions

Hotels with distinct low and peak seasons

Different customer sources may have following deposit rates

Travel team, OTA, frequent flyer, conference team

A source of entertainment, a regular guest

Contract companies, temporary visitors, local sources, others...



Contribution ratio of various main customer sources


Must have a target sales plan and budget


For initial client structure

Hotel with frequent and unstable transfers

Must be parsed

Quality control problems in hotel

Any choice

Follow-up and feedback required after implementation of managerial behavior


All kinds of data analysis instructions to achieve ultimate goal of profit

In general


The Importance of Revenue Management for Hotels

This is reflected not only in direct benefit of hotel

Discovered a new business model


Continuous search and application


The operation and management plan that suits your hotel,can develop

Break your routine for immediate results and success

Principles and formulas of hotel management

Revenue management basics

This is a floating price

A deep understanding of product is required for each category

The value of segmented customers

And implement differentiated management and optimized combination

Segmenting market and customers

For clients with different goals

Quantitative forecast of demand at different times


Optimization method defines dynamic control

Maximize overall hotel revenue

Ensure continued growth in hotel profits

Basics of yield management

Revenue management

Revenue management basics


Determine price according to local market supply and demand

When supply exceeds demand

Reduce price. Increase number of bookings

Increase income

When demand exceeds supply

Increase in housing prices. Maximum income

Tune or optimize customer source structure. Maximize your income

The formula for calculating average price of a house

Average room rate

Total room sales ÷ actual room sales


There are 100 guest rooms

of which 60 are standard rooms

RMB 180/room

40 single rooms

RMB 160/room

20% discount on room rate per day

RMB 144/room for a standard room


Room 128 yuan/room

Actually 80 rooms for rent

40 standard rooms and 40 single rooms


Total room sales per day

=144×40 +128×40=10,880

Average daily room rate

=10 880÷80=136 RMB

Occupancy formula

=Actual number of rooms for rent ÷ number of rooms available for rent×100%

I like Hotel B

There are 1010 rooms

Number of rented rooms per day 350




Daily income per room

RevPAR. Formula

RevPAR can be calculated in two ways

Formula (l)

RevPAR=real room revenue ÷ total available rooms

Still higher

A hotel as an example. Hotel RevPAR


This number indicates


The income from each issue was 108.8 yuan

The business situation is still fine

Formula (2)


=Occupancy×Average Home Price=80%×136=108.8

If above

Hotel A actually rents out 50 rooms

30 standard rooms and 20 single rooms


Total countNumber of room sales per day

=144×30 +128×20=6,880

Average daily room rate

=6 880÷50=137.6 yuan


=(50÷100)×100% =50%;


=6 880÷100=50%×137.6



this is a very important indicator

Because we're only looking at fillability


Hotel quality assessment

Same reason

You can't draw conclusions based on average house price alone

And RevPAR

This can help more comprehensively

Understand hotel terms and conditions


It is based on two aspects of occupancy and average cost of housing

Come see hotel in action

Give me an example

Let's say hotel has 100 rooms

His RevPAR is 100 RMB

No calculator then

It can also be calculated

Gross room revenue

=100×100×365=3,650,000 yuan

One room

Hotel with 100 rooms

If average house price falls by 5 yuan

Occupancy decreased by 4.5%

Results in a 10% decrease in RevPAR


Causes a serious decline in annual gross profit

Less annual gross profit than before

1528 750-1280423=248 327

That is a reduction of more than 240,000 yuan

The ideal average price formula(l)

Perfect single room

Average room rate

=Revenue from sale of single rooms at a standard price ÷ total number of single rooms

If available

Economy class hotel with 100 rooms

25 single rooms

Market price 160 yuan, 50 double rooms

Market price 180 yuan, 25 double rooms

Retail price 180 yuan


Desired average price for a single room

=25×160÷25=160 RMB

Average price for a double room

=Revenue from sale of double rooms at a standard price ÷ total number of double rooms

The hotel ideal in example above

Average price of a double room=50×180÷50=180 yuan

Average price for an ideal double room

=Revenue from large rooms sold at standard price ÷ total number of large rooms

Average price for an ideal double room at above hotel

=25×180÷25=180 RMB

Yield Index

The rate of return index is a measure

An important indicator of quality of a restaurant

Formula for calculating yield index

Yield ratio

=Actual Room Income ÷ Ideal Room

Income × 100%, so-called ideal income

Income from sale of house at regular price


Hotel with 100 rooms

Suppose its market price is 100 yuan

Annual occupancy - 85

Revenue (100×100×365×85%) ÷ (100×100×365)×100%

=85% The higher yield index

The closere income from room to ideal

Yield index

Economy hotels that reach 100% may consider a price increase

If yield is too low

If less than 75%

To find out why

Incorrect pricing, too high prices, too much competition

Business is bad, service is poor, and customers cannot be retained

Problem with original structure

Yield index

It can also be used to compare advantages and disadvantages of two hotels

As a manager of a store, evaluate important indicators

You need to know

Market share is customer share

is market share. In a way

This is more important than revenue management

Which method is used

It can be defined according to development needs of enterprise


Different formulas reflect

The current actual position of hotel

To understand situation, you need to aim and then make appropriate changes and strategies