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Room Revenue Management

| Article by Pelican ‘Hotel Reservation Management’ System

Hotels are subject to supply and demand, but (unlike manufacturing) when occupancy is high they cannot add capacity to respond to fluctuations in demand. On the other hand, in a period of slack demand (low occupancy), a hotel cannot reduce its supply - and fixed costs remain. Thus, to get a maximum amount of revenue and the least cost, a hotelier has to think of how to distribute his ‘fixed’ room supply to the right party, at the right time and at the best possible price.There three main constraints in distributing room supply correctly, namely, time, customers, and rates. These three factors are interrelated, and must be considered as a whole.

- Time includes reservation time (when the reservation is actually made) and period of stay (how long is the stay, when the guest will stay, i.e. during a weekend, on a weekday, in a holiday month)

- The Customer, appreciated as the one who actually makes the reservation, as direct guests, wholesalers, travel agents or corporate clients

- The Rates, in a schedule, which can be as varied or customized as necessary (i.e. high/low season rates, travel agent rate, corporate client rate)


Marriott Hotel pioneered an original ‘flexible rate system’ back in the 1990’s, and it proved to yield satisfactory results, not only for hotels but also for guests.

It is based on a rather simple principle (a fixed demand situation), determining the current value for a given hotel’s room. A room sold 30 days before a staying period would not cost the same as one sold just before a guest’s arrival. This yields satisfactory results since guests can simply control reservation time and length of stay, adjusted to their ability and willingness to pay. Leisure travelers able to arrange their holidays months in advance will be pleased to get lower rates, through making their reservations in advance. Business travelers, mostly ‘last minute’ travelers, really do not have as much flexibility as leisure travelers; and will thus be more likely to pay steeper rates.

A well-engineered reservation system will definitely facilitate hotels in managing its room supply, in terms of setting rates and distributing room allotment (supply) to customers.

In this regard, note that the Pelican ‘Hotel Reservation Management’ System provides a user-friendly, yet sophisticated, system, benefiting hotels along with customers. For a hotel, Pelican offers numerous benefits, namely, the ability to set unlimited rates, the ability to distribute room allotments to all possible customers &#126 on a ‘first-come, first-served’ basis, a sophisticated web promotion engine and many others.

Features that will reveal benefits to customers include instant confirmation and direct access to hotels with ‘online contracting’ (for travel agents and corporate clients).

An online reservation system does not simply process reservations. Through a comprehensive understanding of demand management, such a system will make allocating room supply to the right party, at the right time, and at an optimal price a more efficient procedure for all concerned.