Hotel Sales Revenue

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The main sources of revenue in a hotel are through sales in rooms, restaurants and bars. Identify and evaluate other possible sources of revenue.

‘One of the fundamental business concepts is that a company is in business to make money’ (Hales, 15:2005). Revenue is the monetary amount that customers pay to receive a product or service and is the first aspect considered when conducting financial analysis as it starts the cash flow process of a company (Hales and Van Hoof, 2010). Moyer et al (1995) explain that companies compare their financial situation to their past performances and competitors through revenue by financial ratios. Hales (2005) notes the formula to calculate revenue is Rate x Volume = Revenue, the volume is the number of units sold and the rate is the price paid for the product or service. After revenue is calculated it’s shown on an income statement, which reflects the operations of a company on a monthly, quarterly or annual basis, also known as a profit and loss statement (Gowthorpe, 2005). The benefits from income statements are that several departments are included for companies to see where there revenue is being generated (Coltman and Jagels, 2001). In such statements hotels often refer to their revenue per available room as RevPAR; this assesses the overall earning power of the rooms available for sale and as a key measure for evaluating the usage of accommodation letting spaces (Adams, 2006; Barrows and Powers, 2009). Walker (2007) notes that yield management, also referred to as revenue management is used to maximise room revenue at hotels. It is based on the economics of supply and demand, which means that prices rise when demand is strong and drop when demand is weak (Harris, 1999). Heller (2011) describes January as a quiet month for the hotel industry and by implementing yield management strategies such as decreasing prices during this time, this has increased overall occupancy. Knowles (1998) believes that the three main sources...
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