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Lecture 2

HTM 4454 Lecture Notes - Lecture 2: Liquid Oxygen, Market Segmentation, Aarp

Hospitality and Tourism Management
Course Code
HTM 4454

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LO2: Into to Revenue Management & Process of Revenue Management
1. Revenue Management Definition
a. Classic right room, right customer, and right price
b. Modern right room, right customer, right price, right moment, and
right distribution channel
2. Necessary Conditions
a. Supply & Demand Structures
i. Cyclical Demand (weekly, monthly, etc.)
ii. Fixed Supply/ Capacity
iii. Perishability (unable to inventory)
1. Ex. Unsold rooms don’t carry over
iv. High fixed costs as a % of Total Cost (low variable costs)
1. Large majority of variable costs is human resource costs
b. Market Structures
i. Difference in the value of customer segments
ii. Taste and buying heterogeneity across customers
3. Marketing Strategies
a. Peak Season Strategy high value customers and opportunities
b. Shoulder Season Strategy push out the season (events, etc.)
c. Off Season Strategy building alternative products
4. Market Structures
a. Identification of market segments based on how they purchase, what
they want, and/ or how they consume a product
i. Taste & Buying Heterogeneity wants/ willingness to pay/
purchase timing/ purchase channel
b. Variance in the value of a customer
i. Targeting and Rewarding high value customers
1. High value customers tend to book last
a. Booking curve pattern of booking segments
b. Protect rooms for these customers
c. How do you determine value?
i. Historically it was short-term, transaction
ii. Relationship based value would focus
more on long-term
2. Primary/ secondary (filler)
5. Revenue Management Process
a. Creating the Revenue Management Framework
i. Identify Key Market Segments
1. Transient Business, Transient Leisure, Group, Contract,
a. AHLA Uniform System of Accounts
i. Financial Statement set-up
ii. Defines market segments
b. Influence of the brand largely defines front-end
of market segmentation
ii. Establish initial rate structure (categories and rates)
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