Essay About Revenue Management And Peak Hours

An Evaluation of Guests Preferred Incentives to Shift Time-Variable Demand in Restaurants
Essay title: An Evaluation of Guests Preferred Incentives to Shift Time-Variable Demand in Restaurants
Asked for their reactions to specific demand-shifting
tactics based on revenue management, patrons of a
restaurant in Ithaca, New York, indicated that they
generally would be willing to shift their dining time to
off-peak hours in exchange for discounts on menu
items. Better than three-quarters of the 367 respondents
agreed that they would accept an incentive for
dining at an off-peak time. Specific results and conclusions
are detailed below.
Keywords: revenue management; pricing strategies
As airlines and hotels continue to build and refine
successful revenue- management strategies,
restaurants have recently realized the value that
revenue-management planning can bring to the bottom
line. Because the operational elements of restaurants
differ from those of airlines and hotels, restaurants
cannot simply apply the same revenuemanagement
strategies as those used by airlines and
hotels. To provide an enhanced understanding of how
to use revenue management in restaurants, we first
provide a brief overview of revenue management
and its strategic levers. Next, we
examine and identify the specific characteristics
of restaurant revenue management.
We then showhowprice- and valuebased
strategies can be used to enhance
revenue by shifting demand from peak or
oversold periods to shoulder or low times.
Focusing on the use of packaging, pricing,
and discounts, we then test consumers’
perceptions of incentives to dine during
off-peak business periods and observe
how these perceptions are related to
guests’ dining behavior. We conclude
with a discussion of proposed revenuemanagement
strategies restaurants can
use, based on our findings.
Overview of Revenue
Management
Revenue management is characterized by
a set of techniques designed to help a business
sell the right products to the right
guest at the right time and for the right
price.1 This can be achieved by understanding
a business’s inner workings and
constraints and by managing the business’s
capacity to obtain the best profit or
revenue.2Arevenue-management strategy
helps a firm’s managers decide how to
allocate and price its capacity to capture as
much demand as possible given the operation’s
constraints. To apply revenue-management
techniques effectively, the business’s
operating structure should feature:
(1) relatively fixed capacity (e.g., seats,
hours of operation); (2) predictable and
time-variable demand (i.e., high-demand
or hot and low-demand or cold periods
throughout the operating day); (3) perishable
inventory (i.e., revenue lost due to an
unsold seat cannot be recouped during a
given meal period or operational time
period);