Chapter 1 – Introduction

Perishable Capacity: Transportation, Hotels & Restaurants, Entertainment,

Service and Retail
Birth of RM: American Airlines (Champion) vs. People Express (Challenger) –
Style, Fare Structure, Avg. Cost, Avg. Yield; People’s Revolution (everyday low
prices); American Strike-back (ultimate super saver – dinamo)
Price Discrimination Challenges – No barriers to entry, no search costs,
Arbitrage; RM support – High fixed costs, Fences, Channels, Availability
Controls
RM for price discrimination – analyse segments, identify fences and channels,
predict behaviour, manipulate demand, respond to market, manage
availability
Perishability – product cannot be stockpiled for future sale, non-decaying asset
logically perishable, opportunity cost due to capacity availability (used or
unused)
Spoilage – Perishable assets spoil if unsold, worthless, high price better than
low price, sale price>marginal cost is better than spoiling
Overbooking – selling more than physically available, reason – cancellations
and increased chance of selling out
Denial – too many purchases are claimed
Spills – demand for a product not captured
Recapture – providing alternative product in case of spill
Cross-selling – active recapture
Cannibalization – when low value product is too cheap, redirect demand away
from high value products, lower/diluted revenues
Chapter 2 – Hotel Revenue Management
Role of Revenue Manager
Negotiated Rate – special rate, fixed period, specific client
Black-out Date – date when hotel does not honour negotiated rate
Negotiated Rate Agreement – document detailing contractual agreement of
negotiated rate between hotel and client
Length of Stay = Room Nights Sold/Rooms Sold
Central Reservation System – Bowring Affiliations
Rate Resistance – refusal to make reservation because rate quoted is perceived
to be high
Displace (Revenue) – substitute one source of revenue for another
Room Rate Economics – price rooms based on customer reaction to pricing
strategies
Law of Demand – supply constant, increased demand, increased price and vice
versa
Law of Supply – demand constant, increased supply, decreased price and vice
versa
Rate Type – unique rate for specific type of room; Rack rate (bed type,
amenities, location, size); seasonal rates, special event rates, corporate rates,
government rates, group rates, package rates; American Plan, Modified-
American Plan All-Inclusive Plan, European Plan; Day rates, Half-day rates, Flex
rates
Traditional Pricing Strategies – Hubbart Room Strategy (ROI and FF&E)
Web-influenced Pricing Strategies – Competitive, Follow-the-leader, Prestige,
Discount
Call-around – Determine room rates by calling competitive hotels
Rate Integrity (Parity) – Degree of room rate comparability regardless of
distribution channel
Distribution Channel – source of potential room reservations
RM Tools – Room types. Market code (guest types differentiated by sales
source), Track code (guest types differentiated by traveller demographics)
RM Essentials – Managing Occupancy: CTA (closed to arrival – declines
reservations on specific date), Over-booking – Over sold capacity, Walked
(relocation of guests from the reserved hotel to another hotel due to
unavailability); Managing ADR – lowering rates does not always increase
demand, room discounting effective strategy; Measures of Effectiveness:
Occupancy Index = Occupancy Rate of Selected Hotel/Occupancy Rate of
Hotel’s Comp Set, ADR Index = ADR of Selected Hotel/ADR of Hotel’s Comp Set,
RevPar Index = RevPar of Selected Hotel/ RevPar of Hotel’s Comp Set, GoPar =
Revenue-Controllable Expenses/Available rooms for that period
Yield management – philosophy, implementation, techniques; occupancy and
ADR should be close, rate integrity essential, RM daily activity, gambling is
necessary at times
Chapter 3 – Air Cargo
Introduction – logistics, SCM, high valued goods, 1/3 of aggregate value of
international trade
Process – Shipper, Origin freight forwarder, export customs, storage, loading,
unloading, storage, final destination, import customs, Destination freight
forwarder, Consignee
Players – Shipper, Forwarder, Carrier, Ground Handler, Consignee
Shipper to Origin Forwarder Relationship
Air Waybill – unique to shipment, shipping instructions, description, charges
Origin Forwarder to Carrier Relationship – allocation booking, free sale (ad
hoc/spot) booking
Products – Express, General
Special Handling Codes – DGR, EAT, AVI
Itinerary/Route
Air Cargo Space – Allotment, Free-sale
Origin Forwarder to Ground Handler Relationship
Unit Load Devices – pallet/container to load baggage, cargo or mail, structured
and removable, also called containers, common ULDs: LD3, LD7
Airport to Airport Relationship
Flight Leg – trip of an aircraft from take-off to landing
Tail Number – alphanumeric registration number of aircraft
Aircraft – typical (only freight), combination (freight and passengers), aircraft
manufacturers, types (wide body, narrow body)
Passenger vs. Cargo – unit of demand, unit of sale, capacity, network balance,
routings, booking controls
Chapter 4 – Hotel Demand Forecasting
Types of algorithms – seasonal and historical
Holistic demand predictions
Auto Assignment and Tuning the Best Model – history, recommend and tune
best model, establish forecast unit for demand management
Hotel revenue forecasting – historical (same day same year, moving average,
exponential smoothing, ARIMA), advance booking (additive – classical pick-up
& advanced pick-up, multiplicative – synthetic booking curve, other time
series), combined (weighted average of historical and advanced, regression,
full information model)
Forecasting Issues – what to forecast, level of aggregation, un-constraining
methods, number of periods, data coverage, outliers
Forecast Accuracy

Chapter 5 – Segmentation
Market Segmentation – divide large heterogeneous markets into small markets
with unique needs
Types of markets – consumer, business, international
Consumer Markets – geographic, demographic, psychographic, behavioural,
age & life-cycle, gender, income, occasion, benefit, user status, usage rate,
loyalty status, Multiple – geo-demographic

Chapter 6 – Theme Park

Chapter 7 – Car Rental