The purpose of professional revenue management is to signifi cantly increase company profi ts and owners’ ROIs through advanced revenue management and strategic pricing techniques. These techniques are always customer-needs driven, not company-needs driven. Revenue managers effectively manage revenue. What does it mean to manage revenue?

The answer is too complex to provide in one or two sentences. In fact, it will take the entire contents of this book for you to learn what it truly means to become a professional at managing revenue in a hospitality setting.

This book will teach you to be a customer-centric manager of revenues.

Essential RM Terms

Revenue manager: The individual or team responsible for ensuring that a company’s prices match a customer’s willingness to pay. Abbreviated in this book as RM.

Customer-centric revenue management: A revenue management philosophy that places customer gain ahead of short-term revenue maximization in revenue management decision making.

You have already learned that only those businesses that provide their customers true value will stay in business. As a result, one way to consider the overall purpose of successful revenue managers is to recognize that their role is to help their businesses succeed by ensuring that customers receive true value in every transaction made with that business.

For hospitality businesses, that means employing pricing strategies that result in charging prices that informed customers will willingly pay for the right products, in the right quantities, through the right channels, and at the right times.

Channel: A source of business customers. Also, a vehicle used to communicate with a source of customers. Also known as a distribution channel.

Revenue management can be thought of as the entire set of strategies addressing the issue of value offered to customers. Strategic pricing is concerned with establishing a selling price that best communicates the value provided to customers.

Questions

1. What kind of three things effective managers of an organization’s revenues simply must do?

2. What is barter system?

3. Who is customer-centric manager of revenues?

Literature:

1. Mark Haley, Jon Inge “Revenue Management. It should be called profit management” http://ishc.com/wp-content/uploads/art_rm04.pdf

2. Hayes, D. & Miller, A. (2011). Revenue Management for the Hospitality Industry. Hoboken, NJ: John Wiley & Sons, Inc.

Topic 2. Strategic Pricing in Hospitality

2.1. What Is a Price?

2.2. The Importance of Price in the 4 P’s of the Marketing Mix

2.3. The Role of Supply and Demand in Pricing

2.4. The Role of Costs in Pricing

2.5. Implementing Strategic Pricing

What Is a Price?

Unfortunately, RMs who wish to better understand what the term price means based on a dictionary definition will face a dilemma. This is so because the meaning of the word price varies based on one’s perspective. An economist views price as “the cost at which something is obtained.” The accountant prefers to defi ne price as “the amount of money something

would bring if or when it is sold.

Hospitality professionals with a marketing background will no doubt have encountered a defi nition of price similar to one of the following:

Price: The value placed by a fi rm on its products and services.

Price: The amount of money charged for a good or a service.

To begin, it is important to understand that, for an RM, the term price is both a noun and a verb. A very careful examination of price as defi ned in this text will reveal two important details:

1. Both the seller and buyer are part of the definition.

2. The concept of value “given up” is present whether price is used as a noun or a verb.

Essential RM Term

Price: Noun: A measure of the value given up (exchanged) by a buyer and a seller in a business

transaction. For example: “The price of the room is $245.00 per night.”

Verb: To establish the value to be given up (exchanged) by a buyer and a seller in a business transaction. For example: “We need to meet with the revenue management team to price the New Year’s Eve dinner package.”