Revenue Management & Pricing Flashcards

What is Revenue Per Available Room (RevPAR) and how is it calculated?

Answer: Total room revenue divided by total available rooms, measuring revenue performance

RevPAR is calculated by dividing total room revenue by total available rooms (or ADR × occupancy rate), serving as the primary metric for measuring hotel revenue performance.

What is dynamic pricing in hotel revenue management?

Answer: Adjusting room rates in real-time based on demand, competition, and market conditions

Dynamic pricing adjusts room rates continuously based on real-time demand levels, competitor pricing, booking pace, seasonality, and market conditions to maximize revenue.

What is the Average Daily Rate (ADR)?

Answer: Total room revenue divided by the number of rooms sold

ADR is calculated by dividing total room revenue by the number of rooms actually sold, measuring the average realized price per occupied room.

What is overbooking and why do hotels practice it?

Answer: Accepting more reservations than available rooms to compensate for expected cancellations and no-shows

Hotels intentionally overbook to compensate for anticipated cancellations and no-shows, using historical data to optimize occupancy. When overbooked guests arrive, hotels must 'walk' them to other properties.

What is the purpose of a rate fence in revenue management?

Answer: To create logical barriers between different rate levels to prevent customers from trading down

Rate fences are rules and restrictions that differentiate rate products, preventing high-value guests from accessing discounted rates intended for price-sensitive segments.

What is yield management's primary objective in hospitality?

Answer: To sell the right room to the right customer at the right price and time

Yield management aims to maximize revenue by strategically managing room inventory, selling each room to the optimal customer segment at the most profitable price point and timing.