๐จ Revenue Management Basics for Hotels
๐ฐ The first step in revenue management is knowing your room costs. If you charge too little, you risk losing money.
๐จ Example: The Wagon Wheel Inn has 100 rooms priced between $50 and $100. The focus is on the cost of the most inexpensive room.
๐ There are two types of costs:
โก Incremental Costs include utilities, breakfast, and housekeeping. For example, if a room is sold for $10, it may not cover the $20 incremental cost.
๐งน Burdened Costs include fixed expenses like salaries, insurance, and maintenance. These costs remain constant regardless of occupancy.
๐ To calculate burdened costs, divide total expenses by the number of rooms sold. For instance, if total expenses are $400,000 and 10,000 rooms are sold, the burdened cost is $40.
๐ก Understanding these costs helps in pricing strategies. If your room rates are between $50 and $100, knowing your costs allows you to make informed decisions about discounts.
๐ Regularly assess your costs to avoid financial pitfalls. Selling rooms below the burdened cost can lead to losses.
๐ง For more insights on revenue management, contact me at ask@bransonman.com.