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
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