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1. INTERNATIONAL
MANAGINGYOUR REVENUE:MODULE 1
BASIC PRINCIPLES OF
REVENUE MANAGEMENT

2. INTERNATIONAL
WHAT’S THE BEST WAY TO BE PROFITABLE?

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WHAT IS “REVENUE MANAGEMENT”?
• Tracking information and applying knowledge to
allocate the right capacity to the right customer
at the right price at the right time
• RIGHT means maximizing potential for the
operator and maximizing value to the customer

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THE LEVERS OF GOOD REVENUE MANAGEMENT
REVENUE
MANAGEMENT
MANAGING
DEMAND
MANAGING
PRICE
WAITLIST
MANAGEMENT
DURATION
MANAGEMENT
DISCOUNTING
MENU
ENGINEERING

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REVENUE MANAGEMENT CAN BE USED FOR
ANY BUSINESS THAT HAS THE FOLLOWING:

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FIXED CAPACITY
• Number of seats
• Staffing
• Kitchen capacity
• Menu item limitations
• “Experiential capacity”

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VARIABLE (BUT PREDICTABLE)DEMAND
• Reservations (maybe)
• Arrival patterns
• Varying duration depending on
party size or meal period
• Seasonal and day-of-week
fluctuations

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Chevys Arrowhead: Seat Occupancy
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
11 12 1 2 3 4 5 6 7 8 9
Hour of Day
SeatOccupancy%
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Total Number of Occupied Seats
Total Number of Seats in Restaurant
SEAT OCCUPANCY

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SEAT OCCUPANCY
• Increase seat occupancy by
seating parties at the right
size of table whenever
possible

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PERISHABLE INVENTORY
• It’s not just the food – the seat!
– An unfilled seat is revenue lost forever
• Inventory measured in “available seat
hours” (ASH)
• Sample calculation: 110 seat
restaurant, open from 5:00 pm to
12:00 pm Tuesday through Sunday
ASH = 110 x 7 hours x 6 days = 4,620 ASH
per week

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IN RESTAURANTS, THE GOAL IS TO
MAXIMIZE REVENUE PER AVAILABLE SEAT HOUR
• Low RevPASH (“Cold” hours):
– Increase demand
– Increase average check through upselling
• High RevPASH (“Hot” hours):
– Increase seat utilization
– Increase price where feasible

12. INTERNATIONAL