Are you leveraging the Quantity Price Magic?

POWER TIPS SERIES

Power Tip 4 – Are you leveraging the Quantity Price Magic?

If you have not read Power Tip 1, go here for it on RevPAR VS Average Daily Rate focus or Power Tip 2 here for Buffet Spreads – bundling food and beverage items for higher profits and here for Power Tip 3 here for Are you sacrificing sales mix for sales?

Are you leveraging the Quantity Price Magic?

Are you leveraging the Quantity Price Magic?

A Room sold at a lower rate is any day better than a room vacant from a bottom line perspective
What does this mean? How can you leverage this powerful principle?

Room Revenue is contributed by two major elements – price and quantity. In other words, occupancy and average rate. But this is common knowledge. What is uncommon is their impact on profitability.

Price and quantity affect profitability differently. Any additional dollar of revenue earned contributed entirely by price (average rate) tends to go entirely to the bottom line when compared to revenue contributed by quantity which brings with it variable costs.

In short, if the major part of your room revenue performance is contributed by price or average room rate than volume or occupancy, you should me making more profits than if volume was making such major contribution.

So, next time you are analyzing your profitability, be aware that it all boils down to how your revenues were delivered. The top line influences the bottom lime. One of the most powerful principles profitability behavior.

Watch out for Power Tip 5 in the Power Tips Series.

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About S Lakshmi Narasimhan

I am the Founder of Ignite Insight LLC a New York City based consultancy, which specializes in Group Executive Training, Coaching and Consulting. I coach, train hotel non-financial managers how to optimize profits in the operation. I run my own online financial academy called Cloud Academy – Master Numbers without a Degree. Visit http://www.elearningcloudacademy.com for details on the courses that are offered. These courses are self-paced, easy to understand in an inter-active, blended learning environment. I teach Hospitality Finance Graduate class and Financial Management Under Graduate class during the Spring and Fall semestes as an Adjunct Faculty member at the New York University, Tisch Center for Hospitality, and Tourism in the School for Professional Studies.
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