Revenue Management is The Philosophy of Business. It is very successfully applied to the hotel industry, transportation, ticketing and communication fields. Its potential is virtually unlimited and it can be exploited in restaurants industry, retail market and sale of services. Then, What is its best definition?

What is Revenue Management?

Revenue Management is a scientific subject which aims at forecasting real time market demand through data analysis in order to optimize availability and price of any product dynamically. Its final target is Revenue Maximization.

Revenue Management is NOT:

  • increasing and decreasing price continuously;
  • decreasing price until crossing the demand in order to sell all the available products.
Who needs a Revenue Manager?

3 Revenue Management key concepts

Every product is perishable

Every product, being it a fruit or a hotel room, has a limited life time and, when it expires, that product becomes unsaleable. A good Revenue Manager has to set the right dynamic pricing strategy in order to maximize revenue of each sale.

Scientific method

When defining the right price, following intuition isn’t possible anymore. A scientific method is always necessary, a well defined process, made up by practical and theoretical steps, based on data analysis and hyphotesis processing, whose objective has to be market demand forecast in order to maximize revenue. There are no shortcuts.

Price, not just costs.

The so called Cost Based Pricing is the worst possible pricing strategy, since it does not valorize price, but simply aims at limiting costs and re-thinking the selling strategy of any product related to The Break Even Point. The alternative is working in a Price Based Costing view.

Do you need aRevenue Management Consultant?

More Revenue Manager, less Guru.

Revenue Management is not “the umpteenth Guru science” and it is not a single shot. It is a process always in progress. It needs regular reviews and a strong supervisor. Revenue Management is based on the concept of collaboration among professionals from several fields, especially the entrepreneur and her/his employees, the real pillars of any business.

Do you want to learn more about Revenue Management?

    Books on Revenue Management: my suggestions.

    In a “Influencers World”, I had the fortune to meet some Real Professors, authors whose works you should read in order to improve your Revenue Management knowledge. I suggest you three names, you can call it a small bibliography.

    Robert G. Cross, Revenue Management, Hard-Core Tactics For Market Domination, Broadway Books, 1997.

    This book well deals with the historical-economical situation in which Revenue Management was born and it defines with great precision the core concepts of this subject. It’s not about hotel industry specific topics, but it is correctly considered one of the first Revenue Management popular book.

    Ira Vouk, Revenue Management Made Easy, San Diego 2018

    This is an incredibly clear “Big Small Book”. In its few pages it outlines the most important Revenue Management elements and strategies used nowadays in the hotel industry by one of the most famous Revenue Manager in the world.

    S. Makridakis, S. Wheelwright, R.J. Hyndman, Forecasting: Methods And Applications, John Wiley & Sons, Inc. 2005

    A Technical Book, but very clear and not too formal. It enlights theories and methods of Forecasting, one of the most important hinges of Revenue Management. It adopts a statistical-mathematical language, but trying to understand its conceptual aspects could bring to a deep Revenue Management comprehension.