Growing Restaurant Revenues: Revenue Management Series. Part 1

Grow your restaurant's revenue with powerful restaurant revenue management strategies

Perhaps, your restaurant is thriving, but you're always seeking a few new strategies to further boost sales. Or maybe your restaurant isn't making enough revenue and you need a solution to avoid having to close your doors. Regardless, the solution to both possibilities remains the same: Better restaurant revenue management.

Read on to learn more about growing your restaurant’s revenue in our three-part restaurant revenue management strategy series.

We’ll begin with the initial concept itself: What is Restaurant Revenue Management? And, in part 2 and part 3 of the series, we will take a deeper dive into 3 powerful restaurant revenue management strategies that will help to grow even the busiest restaurant’s revenues.

What is Restaurant Revenue Management?

Sheryl E. Kimes, professor of operations management at Cornell University’s School of Hotel Administration (Ithaca, NY), defines restaurant revenue management as “selling the right seat to the right customer at the right price and for the right duration."

Sounds easy enough, doesn’t it? Well, with accurate data obtained from your point of sale system (POS), a quick formula calculation, and strategy or way-forward based on the findings – it can be.

Revenue management is not a new concept. It’s commonly used in the airline and hotel industry and it's now becoming more common in the restaurant industry because restaurants embody many of the same business characteristics of airlines and hotels that made revenue management so successful.

These characteristics include perishable products, fluctuating demand, high fixed costs, fixed capacities, and low variable costs. There is, however one notable difference: The service capacity isn't fixed.

Sure, you may have a certain number of seats, but service duration is variable. For example, some guests spend two hours eating while others spend three. That's in stark contrast to hotels and have fixed check-in and checkout time or even airlines where customers board and disembark at the same time.

Furthermore, space is limited, which places some constraints on service capacity, but unlike airlines or hotels, you're able to make changes to accommodate increases in demand. For example, you can adjust your table layout or give diners access to another section of your restaurant like your patio.

Revenue management rests on a measure of the time involved in the guest-service cycle. This time-based measure of restaurant operation is called revenue per available seat-hour (RevPASH). This is a key component of the process. The 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. Restaurant owners and 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.

Restaurant revenue management can be challenging. But can also be very beneficial if the right strategies to manage restaurant capacity, manage table turn-over, and engineer a menu for profitability are implemented.

Caymera International is offering a course in Restaurant Revenue Management. In this course, we will guide you through the restaurant revenue management process, providing real-world examples, strategies, and techniques that will help you apply these tools to your own restaurant. For more information, please contact info@caymeragroup.com.

Brooke Meyer is the managing partner of Caymera International, a Caymanian-owned hospitality and tourism consulting and advisory firm. Visit Caymera at www.caymeragroup.com or email info@caymeragroup.com for more information.