Revenue Management or revenue optimization, has its roots in the airline and hotel industry, but in recent years has gained a foothold in the restaurant industry as well.
In the hotel industry, revenue management is especially visible in pricing, I remember discussing the topic with a colleague in the industry, he said that this is what we have been doing since the 70s; back then it was called Happy Hour!
There is certainly a lot of truth in this. I believe that many restaurants use elements of revenue management, such as different pricing at different times, but without planning and strategy or statistics to base the decisions on.
Traditionally, the restaurant industry has focused on the cost perspective, for example when it comes to supply and pricing, but has not taken market forces into account. With the help of the theory of revenue management, ways are developed to take control of demand and pricing in order to optimize turnover - the end result is profit maximization.
Cost-based key figures such as gross profit are well known in the industry, other things that also start with the letter C are controlled in revenue and profit management:
Take control of the restaurants C -letters
In the restaurant, the capacity is customer seats - chairs. This means that the places that were not filled during lunch or the evening cannot be used for customer service and thus generate turnover later. How many seats did your restaurant fill and how many seats remained empty yesterday? Alternatively, how many times did you manage to "recycle", i.e. fill the places?
When do customers arrive and how long do they stay? On which days and at what time do the customers want to arrive? It's easy to give customers a certain amount of time to sit at the table, but I believe that when a customer is "given" three hours, they will also sit there for three hours. But, if the customer is not given a time limit, then how long will they stay?
When do customers book? When do they book the Christmas table, Tuesday lunch or dinner for Friday? Is it possible to set simple booking rules for the most popular days? Some customers do not make a reservation at all, how many are there?
CASH - CARD PAYMENTS - COINS
It's not about our money, but the customer's and which we want! At this point, the price comes into the picture and with the help of pricing we can charge for the time the customer spends in our restaurant. However, pricing only has a 20% impact on revenue management strategies.
Through which channels do we get our customers and through which channels do they reserve a table? It is important that restaurants control these channels, so that the channels do not take control of us - here is a good lesson from the hotel industry, where hotel internet booking sites surprised the industry.
TAKE CONTROL of your restaurant's own "C" letters, take statistics into account and shift the focus from expense monitoring to revenue monitoring, which is often much more stimulating. You can then use the market comparison to compare the results with other restaurants that may still be focused on chasing costs…
Revenue management trainer and consultant in Sweden speaking at the Nordic Revenue Forum in Turku on April 20, 2018.