Revenue Management Terminology Can Cause Confusion

Revenue Management Terminology Can Cause Confusion

"Revenue Management" has become a popular phrase because it plays a critical role in hotel operations. However, depending on a person's perspective, it can have different meanings. The short bullet points below, along with the video linked below, will provide more clarity:

• From an academic perspective, Revenue Management can refer to all the revenue sources of a hotel, extending far beyond rooms. It includes revenue from restaurants, gift shops, casinos, shows, skiing, golf, scuba diving, and other activities—even beach chair rentals. Larger hotels aim to optimize total revenue, so they might discount rooms to attract guests who spend on these additional services.

• However, in smaller hotels, non-room revenues represent a smaller portion of total income, or perhaps none at all. Room revenue is typically the vast majority of the total revenue. In larger hotels, managing just the room revenue might be referred to as Yield Management, as it focuses primarily on room-related income and excludes other revenue streams.

• Additionally, in smaller hotels, staff often wear many hats. Advertising may also be part of this broader definition of revenue management because it's how you drive direct bookings. A booking engine without traffic is useless. You can pay OTA commissions or invest in advertising, but either way, you need to know which channel is more profitable. Technically, direct bookings, rates, and booking engines may fall under the responsibility of the marketing or technology department. However, in a smaller hotel, the person in charge of revenue may need to be proficient in all these areas.