Hotel RMS Ultimate Buyer's Guide
Key Considerations for Commercial Success

Hotel Revenue Management Terminology

So much jargon. So many acronyms. What does it all mean? Let our comprehensive glossary of hotel industry and revenue management lingo be your guide.

A

Analytical Market Segmentation

A rules-based process used to create optimal revenue management segmentation from reservation data to support both the best basis for forecast and optimization and key organizational reporting and business intelligence requirements.

Ancillary Revenue

Revenue sources other than room and conference & banquet revenue. Examples include parking, spa, golf, entertainment, etc. Ancillary revenue streams can be configured for group and transient market segments

Artificial Intelligence

The science of training machines to perform human tasks.

Attendee Density

Total number of unique attendees/optimal capacity of venue.

Average Daily Rate (ADR)

Actual daily room revenue/total rooms sold.

Average Rate Index (ARI)

An index that measures a hotel’s rate against its market. Above 100 indicates a hotel's rates on average are higher than its competitors.

B

Best Available Rate (BAR)

The lowest non-restricted rate bookable by all guests. This rate can change several times a week and up to several times a day.

Booking Curve

Visualization of the speed at which bookings materialize prior to the arrival date.

Booking Engine

The system that allows reservations to be made on a website.

Booking Pace

The speed at which bookings materialize over a period of time from the booking date to the arrival date. Booking pace is expressed as a fraction of bookings received on certain days in advance.

Booking Window

The timeframe in which a reservation is made by the guests or a group and the actual arrival date.

Business Mix

The blend of different market segments that occupy a hotel, measured as a value or percent of occupancy.

C

Central Reservation System (CRS)

A reservation system used to maintain hotel information, rates, and inventory status. Processes and manages reservations for one or multiple hotels.

Channel Management (CM)

Provides a way for hotels to control the allocation of inventory and rates across all distribution channels including OTAs, wholesalers and GDS.

Competitive Set

Comparable hotels in a hotel’s vicinity that compete for guests.

Component Rooms

A combination of physical guest rooms that can be converted into various configurations to form larger and more tailored accommodations for guests.

Constrained Demand

The number of rooms that could be sold considering the hotel's capacity or restrictions on bookings.

Cost of Walk (COW)

The cost of turning away a guest when the hotel is unable to provide the promised accommodation, which may include the cost of a hotel room, transportation, meal and probable lost future business.

Customer Relationship Management (CRM)

A system used by companies for customer management and sales management to improve business relationships.

Cutoff Date

The contracted date when the hotel closes a group block and releases unsold rooms to inventory.

D

Day Parts

Practice of dividing the day into several parts, in which a different meeting or event can be accommodated in a function space (morning, lunch, afternoon, evening, etc.).

Days to Arrival

The number of days prior to an arrival date. Used to measure information such as a booking pace, hotel performance and forecast performance.

Demand

Business anticipated for future days.

Demand Forecast

Anticipating the amount of consumer demand for a product through the use of predictive analytics.

Displacement Analysis

An analysis of business (primarily group) based on the total value of the business versus the value of the transient business that would be displaced if the business were accepted.

Dynamic Pricing

The practice of flexing price for a product based on market demand.

F

Fenced Rates

Rates a hotel uses to provide a series of options to guests. The rate is determined by which fences a guest accepts, which might include non-refundable, non-cancelable reservations and advanced purchase reservations.

Forecasting Model

The statistical patterns used to predict demand, occupancy and revenue.

Free Sell

Function-only business restrictions or event-only business restrictions are guidelines put in place at the hotel to ensure space is available for groups within their typical booking window.

Full Pattern Length of Stay (FPLOS)

A pattern indicating whether a rate is open (available) for the arrival date and length of stay.

Function Space Utilization

Calculated by multiplying the available area by the number of day parts being evaluated.

G

Global Distribution System (GDS)

Comprehensive travel shopping and reservation platforms travel agents use to book airline, car, hotel and other travel arrangements for their customers.

Gross Operating Profit Per Available Room (GOPPAR)

A key metric measured by taking total revenues minus operating and marketing expenses, divided by number of available rooms.

Group Demand

The group business expected for an occupancy date.

Group Pricing Evaluation

A system tool that allows users to enter details about a potential group booking, generate an analysis, and use the resulting data to select the best arrival date and rate that will provide the highest benefit to the hotel.

Group Wash

The difference between the final occupancy from a group and the maximum value of the block pace or the pickup pace.

Group Wash by Group

A system feature that provides group business data, including occupancy date, blocked rooms and expected wash, and is also the location from which users can override the system-generated group wash.

K

Key Performance Indicator (KPI)

A quantifiable measure used to evaluate success in meeting objectives. For example: Average Daily Rate (ADR), Revenue per Available Room (RevPAR), Gross Operating Profit Per Available Room (GOPPAR), Occupancy rate, Profits per Available Space Time (ProPAST), Profits per Occupied Space Time (ProPOST) and Function Space Utilization Percentage.

L

Last Room Value (LRV)

The maximum amount of room revenue a hotel can expect to make from the last room available for sale. The system uses LRV as a restriction control for low value rates during busy periods and opens all rates during slow times.

Length of Stay (LOS)

The number of nights a guest stays at a hotel. This value is also the difference between the departure date and the arrival date.

M

Machine Learning

A subset of artificial intelligence that automates analytical model building. It is grounded in the idea that systems can learn from data, identify patterns and make decisions with minimal human intervention.

Market Intelligence

Information related to a company's market, including booking trends, competitor rates and customer reviews.

Market Segment (MS)

A portion of the customers who possess a common set of motivations as well as a combination of unique purchasing (e.g., advance purchase vs. walk-in) and usage patterns (e.g., single night vs. weekly).

Market Segment Group (MSG)

Market segments grouped together by pattern and rate.

Maximum Length of Stay (Max LOS)

A room inventory control function that limits the number of nights a reservation can stay when arriving on a certain date.

Metasearch

A search tool that aggregates rates and inventory from other websites to produce its own results. Examples include Kayak and TripAdvisor.

MICE

Meetings, Incentives, Conference & Exhibitions. An acronym used in sales & catering and function space.

Minimum Acceptable Rate (MAR)

The lowest acceptable amount a group can be charged. Used to calculate the suggested group rate.

Minimum Length of Stay (Min LOS)

A room inventory control function that requires a reservation to meet or exceed a certain length of stay in order to complete the reservation.

N

Net Rate

The price of a room or space minus commission, transaction costs or before being marked up by third party.

New Hotel Service Success Package (NHSSP)

A service offered by IDeaS to new hotels using an IDeaS RMS to begin applying analytics as quickly as possible when the historical data required to build the system is not available.

No-Show

The case where some customers with a reservation do not show up to use the room(s) reserved for them, without explicit cancellation.

O

Occupancy (Occ)

The “fill” measure of a hotel. Occupancy = total number of rooms occupied/total number of rooms available x 100 (e.g., 75% occupancy).

Occupancy Forecast

The constrained occupancy the hotel is expected to achieve for a specified period of time. This value may be expressed either as a specific number of rooms or as a percentage of available rooms.

Online Travel Agency (OTA)

Third-party internet sites consumers can use to book hotel, air, car rental or tour activities. This indirect channel charges a commission or marks up the rate to guests. Examples include Expedia, Booking.com and Ctrip.

Operational Forecast

A forecast based on the anticipated constrained occupancy for a hotel. Used to manage staffing and supplies.

Optimization

The use of forecast, inventory, rate, configuration, and user interaction to calculate the best pricing and inventory control decisions that maximizes quality revenues for a hotel. Optimal pricing, LRV, forecasts and overbooking are the end result of the optimization process.

Overbooking

The practice of selling more product than physically present to account for cancellations and no-shows. The goal of overbooking is to maximize revenue by achieving as close to 100% occupancy as possible on any given day.

P

Predictive Analytics

The use of advanced analytics to make predictions about unknown future events using historic and forward-looking data.

Price Sensitivity

Customer's willingness to pay. Historical pace data is used to estimate how much a change in pricing impacts demand. Demand is either elastic or inelastic.

ProPAST

Profit per available space time (or meal period).

Property Management System (PMS)

A system used on property to manage guests and site activities.

ProPOST

Profit per occupied space time (or meal period).

Q

Qualified Rate

A rate the guest must qualify for. A corporate rate for the guest’s company, a rate available due to an affiliation such as AARP, a promotional package rate with specific booking conditions, etc.

R

Rate Distribution System

A system used to distribute a hotel's rates and inventory to direct and indirect channels.

Rate Shopping System

An online service that supplies competitor rate data to hotels.

Remaining Demand

The system-calculated remaining unconstrained demand for an arrival date in the future, as of the processing date.

Reputation Management System

A system that manages guest reviews for a business.

Reputation Pricing

Pricing science that integrates a hotel’s online reputation, guest reviews and ratings into its revenue management strategy.

Revenue Generated Index (RGI)

An index that measures a hotel’s revenue share in its market. Above 100 indicates a hotel's RevPAR on average is higher than competitors. Used to determine if a hotel is capturing their fair share.

Revenue Management (RM)

The discipline of optimizing availability and price to maximize revenue. Simply put, selling the right product to the right person at the right time on the right channel for the right price.

Revenue Management System (RMS)

The system businesses use to control the supply and price of their inventory in order to achieve maximum revenue or profit by managing availability, room types, stay patterns (future and historical), etc.

Revenue Optimization

A business discipline and culture that focuses on balancing supply and demand in a rational and systematic way to maximize revenue and profit while managing risk under current and anticipated market conditions.

Revenue Per Attendee

Revenue/total number of attendees. Helps venues understand utilization for their space.

Revenue per Available Room (RevPAR)

Daily room revenue/total rooms available.

Revenue per Occupied Space (RevPOS)

Total event revenue/gross occupied square feet (or meters).

Revenue Science

The discipline of infusing sophisticated mathematics with industry expertise to transform data into accurate, automated, and actionable revenue-enhancing decisions.

Room Block

A group of rooms that may be created to organize rooms to aid in planning, sales or other management tasks. Examples include associating rooms with a single fixed price, a single guest, a channel, a group or a single team of staff members that manage or maintain the rooms in the block.

Room Class

Categories used to group room types with similar values.

Room Nights

Rooms blocked or occupied multiplied by the number of nights each room is reserved or occupied.

Room Type

A collection of rooms sharing a common element at the hotel. A room type might be a suite or a single room with a double bed, poolside or ocean-side. A room may belong to multiple room types.

S

Sales Conversion

Potential revenue from all inquiries/revenue booked.

Semi-Yieldable Rates

Rates that can be closed but only when the same room type or length of stay is closed for BAR. For example, last room available accounts.

Shoulder Nights

Nights of less occupancy on either side of peak nights.

Smith Travel Research (STR)

STR is a global provider of competitive benchmarking, information services and research to the hotel industry. STR reports provide property performance data compared to its competitive aggregate and general market, allowing you to follow trends in occupancy, ADR, and RevPAR.

Special Event

A date or set of contiguous dates for which the hotel data cannot be forecasted in the normal fashion, or period(s) where the transient business pattern is different than normal.

System Override

A user-selected value that replaces the demand value calculated by the system.

T

Total Revenue Performance

The intelligent calibration of demand across all revenue streams to meet overall business objectives. It is the ability to instantly and systematically decide which business to accept across multiple revenue streams at all times based on greatest overall value to the asset.

Transient Business

Guests who book individually rather than with a group.

Transient Demand

The anticipated volume of business from transient market segment groups.

TRevPAR

Daily total revenue/total rooms available.

U

Unconstrained Demand

Refers to the number of rooms that could be sold if there were no constraints such as the hotel’s capacity or restrictions on bookings. Unconstrained demand provides a complete picture of all the possible demand, not just the limited demand you accept. Also known as “true demand.”

Unqualified Rates

Rates offered by the hotel to guests who do not have an agreed contract rate and that have no restrictions or booking conditions attached to them.

W

Wash

The difference between the group block and what the hotel expects it will actually pick up.

Y

Yield Management

Set of strategies that help realize optimal revenues for capacity-constrained resources. The core concept of yield management is to provide the right service to the right customer at the right time for the right price by understanding, anticipating and influencing consumer behavior.

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