The Revenue Management Business Process, Designed to Produce Results

By Trevor Stuart-Hill President & Founder, Revenue Matters | August 10, 2014

The unique aspect of the hospitality industry when compared to many others is that lodging establishments come in all sorts of shapes and sizes. Some have extensive resources at their disposal while others simply don’t.

In smaller lodging establishments and in a vacation rental management setting where margins are often razor thin, individuals often perform several roles simultaneously. In cases of larger hotels and resort properties, specific individuals are dedicated to the role of revenue management. Despite these apparent differences, there are some core best practices relating to revenue management that are universal.

What is Revenue Management?

“Revenue management is a business process that is designed to optimize the revenue performance of an asset through all market conditions.” – Trevor Stuart-Hill

In order for revenue management principles to apply, four criteria must be met:

  1. Constrained Capacity: fixed inventory (or resources) available for sale
  2. Perishability: revenue producing potential of inventory (or resources) diminishes rapidly or instantly
  3. Customer Segmentation: different customers are willing to pay different prices
  4. Predictability: ability exists to forecast demand for future points in time

Given the above set of criteria, it is easy to comprehend how revenue management principles can apply in a variety of settings including, parking lots, apartment housing, advertising, restaurants, golf courses, spas and even surgery centers.

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