The Revenue Desk · live tools
Revenue management, you can touch.
Eighteen tools for hotels and restaurants. Each one says what it is, shows the formula, and works as you move the numbers. Put in your own figures. Nothing leaves your browser.
01 · Hotels
Overbooking
How many reservations should I accept for a night I can sell out?
Some guests never arrive. Sell exactly your rooms and the no-shows leave rooms empty. Sell too many and you walk guests to another hotel. The right number balances the two costs.
Expected profit(L) = net rate × E[rooms filled] − cost of a walk × E[guests walked]Arrivals ~ Binomial(L reservations, 1 − no-show rate)Accept the L with the highest expected profit02 · Hotels
Protection levels (EMSR-b)
How many rooms do I hold back for the higher rates?
Rank your rates from highest to lowest. Protect rooms for the higher rates in nested layers, so a room held for BAR 1 is still sellable at BAR 1 if BAR 2 closes. Every room flows to the highest willing payer.
y(j) = NORM.INV(1 − r(j+1) ÷ R(j), M(j), S(j))M(j) = sum of demand means for rates 1…j; S(j) = √(sum of variances)R(j) = demand-weighted average rate of 1…jBooking limit for rate j+1 = capacity − y(j)03 · Hotels
Group displacement
Is this group worth the transient guests it pushes out?
A group fills rooms that transient guests would otherwise have paid for. Take the group only if what it brings beats what it displaces, night by night, including what both spend outside the room.
Displaced rooms = max(0, group rooms + transient forecast − capacity)Gain = group rooms × (group rate + group spend) − displaced × (transient rate + transient spend)Break-even group rate = displaced value ÷ group rooms − group spend04 · Hotels
The price change test
If I cut the rate, how much more must I sell just to stand still?
A discount has to win back the margin it gives away. The higher your variable cost, the more volume a discount needs. A rise can lose some volume and still earn more.
Break-even volume change = −Δp ÷ (contribution margin % + Δp)Contribution margin % = (rate − variable cost per room) ÷ rate06 · Hotels
ADR, net ADR and triple net ADR
What does each channel leave me after it is paid?
ADR flatters. Net ADR takes off distribution cost. Triple net also takes off what it cost to win the booking. Compare channels on what they leave, not what they charge.
Net ADR = gross rate × (1 − commission) − fees per nightTriple net ADR = net ADR − acquisition cost per night07 · Hotels
Pickup forecast
Where will this night finish, given what is on the books today?
Most of a night books in the last few weeks. Add the pickup you normally see from this many days out to what you hold now. Then price the gap between forecast and capacity.
Additive: forecast = on the books + average pickup from this lead timeMultiplicative: forecast = on the books ÷ share usually on the books by nowUnconstrain: a sold-out night hides the demand you turned away08 · Hotels
Why revenue missed budget
Was it price, volume, or both?
Split the miss into a price effect, a volume effect and the effect of the two together. The answer changes the conversation from blame to strategy.
Price = budget volume × (actual rate − budget rate)Volume = (actual volume − budget volume) × budget rateJoint = (actual rate − budget rate) × (actual volume − budget volume)09 · Hotels
Flow-through and flex
How much of extra revenue reaches profit, and how much cost leaves when revenue falls?
Flow-through shows how well the hotel converts growth into GOP. Flex shows how well it cuts cost when revenue drops. Both belong in every monthly review.
Flow-through = ΔGOP ÷ Δrevenue (when revenue rises)Flex = cost saved ÷ revenue lost (when revenue falls)Degree of operating leverage = contribution ÷ EBITDA10 · Restaurants
RevPASH by the hour
Which hours carry my room, and which are wasted?
Judge a restaurant by revenue per available seat-hour, not covers. The same seat is worth very different amounts at different hours. Price and manage the hot hours; fill the cold ones.
RevPASH = revenue in the hour ÷ (seats × 1 hour)Seat occupancy = covers × hours at table ÷ seatsHot: high occupancy, protect it. Cold: low occupancy, fill it.11 · Restaurants
The queue at the door (Erlang C)
Why do two more parties an hour break a dining room?
Waits do not grow in a straight line. As a room nears full, the wait runs away. The last sliver of capacity costs more than all the rest.
Load a = λ ÷ μ; utilisation ρ = a ÷ cP(wait) = [aᶜ ÷ (c! (1 − ρ))] ÷ [Σₙ₌₀ᶜ⁻¹ aⁿ ÷ n! + aᶜ ÷ (c! (1 − ρ))]Average wait once queued = P(wait) ÷ (cμ − λ)12 · Restaurants
Table mix
Why does a party of six queue at the door of a half-empty room?
Seats only earn if the table sizes match the party sizes. A two on a four-top wastes half the table. Match the mix to your parties and seat occupancy rises with no new chairs.
Seat efficiency = guests seated ÷ seats on the tables they useIdeal mix: tables of each size ∝ parties needing that size13 · Restaurants
Meal duration
What are eleven minutes at the table worth?
In the busy hours, time is the constraint. Cut the dead minutes (waiting for the menu, the bill, the card machine) and the same seats serve more guests without rushing anyone.
Extra covers = seat-hours freed in the peak ÷ hours per coverSeat-hours freed = peak covers × minutes saved ÷ 6014 · Restaurants
Restaurant no-shows
How many bookings should I take for a full Saturday?
The same logic as a hotel. Accept a few more bookings than tables, so no-shows do not leave seats empty, but not so many that guests wait at the bar too long.
Expected profit(B) = profit per party × E[parties seated] − cost of a turned-away party × E[overflow]Arrivals ~ Binomial(B bookings, 1 − no-show rate)16 · Restaurants
The price test for a dish
Can I raise this price and still earn more if fewer people order it?
A hotel in Stockholm raised its canapés by one dollar. Volume fell from 220 to 210. They earned more. The test tells you how much volume you can afford to lose.
Break-even volume = contribution now ÷ (new price − cost)Volume you can afford to lose = 1 − break-even volume ÷ volume now17 · Restaurants
Pricing drinks by the cash they leave
Why should a costly bottle carry a lower mark-up?
A fixed pour-cost percentage over-prices expensive wines and under-prices cheap drinks. Guests notice. Price for the cash margin each drink leaves, with a multiplier that falls as the cost rises.
Pour-cost pricing: price = cost ÷ target pour costCash-margin pricing: price = cost × multiplier, multiplier = max(floor, k ÷ cost^0.25)18 · Restaurants
Break-even covers
How many covers a day before the restaurant makes money?
Fixed costs are there whether you open or not. Each cover contributes its check less its variable cost. Divide one by the other and you know the line you must cross every day.
Contribution per cover = average check × (1 − variable cost %)Break-even covers = (fixed costs + debt service) ÷ contribution per coverGo further
The method behind every tool.
Every tool here is a sheet in our workbooks and a chapter in our manuals. When you want it run on your own hotel or restaurant, month after month, that is the work we do.