One of the many challenges facing foodservice RMs relates to the identifi cation of the specifi c factors that will indicate the presence of effective revenue optimization strategies. Recall that revenue optimization consists of disciplined tactics used by RMs to predict buyer response to prices, optimize product availability, and yield the greatest profi ts. Creative RMs can assess their ability to optimize revenues in a variety of ways. For most foodservice RMs, however, a comprehensive assessment of their operations’ effectiveness means evaluating the three key revenue-related factors of facility usage, labor usage, and capacity management. How RMs measure and interpret performance in these three important areas is addressed in the remaining portion of this chapter.

Revenue per Square Foot

The formula used to calculate revenue per square foot is: Total revenue / Total square footage occupied = Revenue per square foot.

Revenue per Labor Hour

The formula for computing this measure of labor productivity is: Total revenue / Labor hours used = Revenue per labor hour.

Revenue per Available Seat Hour (RevPASH)

The formula for RevPASH is: Total revenue / Available seat hours = Revenue per available seat hour (RevPASH). To calculate RevPASH, RMs must be able to identify the number of diners served each hour, as well as the amount these guests spend (revenue).

The Revenue Evaluation Process in Foodservices

Monitoring revenue generation in a foodservice is the key to revenue optimization and profi t maximization. The process is systematic and does demand a signifi cant portion of an RM’s valuable time. The information gained, however, is valuable because it leads to improved decision making.

Effective RMS in foodservices can best assess their units’ revenue generation effectiveness by following 12 important steps.

12 Steps for Evaluating Revenue Generation in Foodservice Operations

1. On at least a weekly basis, analyze revenue generated by each of the operation’s revenue centers.

2. On at least a weekly basis, analyze revenue generation based on the day part producing the sale.

3. On at least a weekly basis, analyze revenue generation based on the service style used to produce the income.

4. On a monthly basis (or 28-day accounting period), analyze revenue production based on revenue center, day part, and service style.

5. Regularly calculate and analyze both dollar amount changes and percentage changes (up or down) for all revenue sources.

6. Monitor alcoholic beverage sales separately from food sales.

7. Regularly monitor and assess the operation’s revenue per square foot efficiency.

8. Regularly monitor and assess the operation’s revenue per labor hour efficiency.

9. Consistently track the number of guest served as well as revenues generated and maintain accurate check average data.

10. Regularly monitor and calculate, on an hourly basis, the operation’s seat utilization %.

11. Set RevPASH goals and systematically calculate and assess the operation’s progress toward meeting those goals.

12. Continually monitor staffi ng levels, food production, and service standards that directly affect the operation’s ability to optimize revenues.

Questions

1. Name three main activities that can be grouped into supplemental assessment efforts.

2. On what will be focused your income analysis efforts?

3. What is the formula of Revenue per Available Seat Hour (RevPASH)?

Literature:

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

2. Segmentation, Revenue Management and Pricing Analytics by Tudor Bodea and Mark Ferguson. First edition by Routledge, 2014. ISBN 0-415-89832-3

3. Stanislav Ivanov. Hotel Revenue Management: From Theory to Practice. 2014. Varna: Zangador