Implementing Restaurant Revenue Management

Abstract

Revenue management (or yield management) rests on a measure of the time involved in the guest-service cycle. Such a time-related measure raises complications for restaurants, because they explicitly sell meals, rather than a period of time at the table. Existing measures of restaurant success do not give restaurant managers an effective gauge for revenue management because they do not capture the time element. Instead, would-be restaurant revenue managers must gain control of the timing and duration of restaurants' meals. The timing depends mostly on guest arrival, which can sometimes by altered with price and menu promotions. Managing duration is complex and relies on control of food production and the service cycle. A time-based measure of restaurant operation is revenue per available seat-hour (RevPASH). That calculation is total revenue for a given period (e.g., meal period, day part, or day) divided by the product of the number of available seats and the length of the period in question. Managers must understand their operation's RevPASH patterns to develop strategies for augmenting revenue, whether those strategies involve shifting customer demand to shoulder periods or tightening the service cycle.