Revenue management in Hotel industry Essay Example | Topics and Well Written Essays - 500 words

Revenue management in Hotel industry - Essay Example identified three conditions which would be necessary for revenue management: there should be adequate fixed resources for sale; the resources should be perishable; and customers should be willing to pay different prices for the resources. Hotels sell rooms as fixed inventory which are highly perishable and attract different prices depending on size, location and availability of unique features. Appropriate forecast enhances identification of cost drivers leading to development of appropriate measures of performance. It would enable an organization understand how operational drivers affect its financial performance outcomes. As budget forecasts are highly dependent on demand and supply, hotels should consider their room occupancy and the charged rates should increase with increase in reservations. But in practice, this does not happen and Salerno (2012) argues that most hoteliers would blindly set rates for future and then get disappointed. Poor accuracy of budgets still remains a problem in many organizations. When forecasts are made way above or below the budget, the organization risks making bad decisions based on the incorrect projections. This would also cause the management to pay less attention to budgets as they become unreliable and not trusted. Generally, inaccurate forecasts significantly affect revenue management system performance as the organization will suffer lack of proper planning (Weatherford & Kimes, 2003). When the forecasts are set so high, Hayes and Miller (2011) argue that the forecast then becomes a motivational tool for increased performance and not a revenue management tool. However, the authors note that no organization should seek to make inaccurate forecasts. These inaccuracies would be a result of deriving facts from poor tools of budgeting such as spreadsheets fed with wrong formulae. Limited time for employees to come up with good projections and their subsequent lack of motivation could also be a reason. Additionally, sidelining