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Hotels can apply revenue-management systems to their function spaces-and boost the revenue contribution from those spaces.
Revenue management, also known as yield management, is commonly applied to hotels' guest-room inventories, but the practice has not yet been systematically applied to hotels' function spaces.1 Hotels' function spaces provide substantial income that could be enhanced by applying revenue-management, as we explain in this article.
As is the case in all revenue-management applications, the goal of function-space revenue management is to maximize the revenue contribution of each function space for each time period that the space is available. The measure we apply for this purpose is contribution per available space for a given time (ConPAST). Hotel managers can manipulate price and event duration to affect this measure. ConPAST has the following three components: contribution, space, and time. We suggest that measuring contribution is preferable to measuring revenue because revenue alone doesn't account for the varying profit margins arising from renting function spaces. Space refers to the number of square feet or meters in the function room, and time refers to the time segment for which the revenue contribution is measured. In this paper, we explain how we developed a revenue-management strategy for the Raffles City Convention Center at the Swissotel Stamford and Raffles Plaza in Singapore. (While those properties are now managed by Swissotel, at the time of our study the hotels were managed by Westin.)
Revenue-management Review
Revenue management is the application of information systems and pricing strategies to match customers with services at an appropriate time and price. A common formulation of revenue management is selling the right capacity (in this case, function space) to the right customer at the right place at the right time.2 The determination of "right" in this instance entails achieving both the most contribution possible for the hotel in renting a function space while also delivering the greatest value or utility to the customer for the reservation and use of that space. In practice, revenue management has meant setting prices according to predicted demand levels so that price-- sensitive customers who are willing to purchase at off-peak times can do so at favorable prices, while price-insensitive customers who want to purchase at peak times will be able to do...