New performance indicators for restaurant revenue management: ProPASH and ProPASM

Measuring business performance is the first step of the improvement process but without knowledge there can be no purposeful action. Revenue per Available Seat Hour (RevPASH) is an effective and reliable indicator of a restaurant's performance, however, it may not provide the whole picture of a restaurant's business performance. In restaurants, the contribution margin of each menu item is different and it should be taken into consideration when evaluating restaurants’ performance, because the goal of restaurant revenue management is to maximize profit, not just revenue. Although several researchers have explored various issues regarding restaurants’ revenue management (RM) strategy, there has been little discussion on how to measure the performance of RM strategies as they apply to restaurants, except RevPASH. Therefore, this study proposes new metrics, ProPASH (Profit per Available Seat Hour) and ProPASM (Profit per Available Square Meter) and discusses how they can be applied to measure the effectiveness of restaurants’ RM strategies.     

Estimating the impact of entertainment on the restaurant revenues of a Las Vegas hotel casino: An exploratory study

Considering the growing presence of non-gaming amenities in a mature casino market such as the Las Vegas Strip, this study examined the indirect contribution of showroom entertainment to casino-operated restaurant business volumes. Using the internal data of a Las Vegas hotel casino, this research found a statistically significant and positive relationship between daily showroom headcounts and food and beverage revenues. For each additional show attendee, daily food and beverage revenue increased $6.96. This finding suggests that casino executives should consider leveraging show traffic with additional revenue-enhancing venues such as restaurants.     

The effect of psychological empowerment climate on restaurant food safety,food quality,and financial performance

ABSTRACT

Consumer food safety incidences that result from employee accidents and behaviors can be detrimental and costly to a restaurant organization. Restaurant organizations and hospitality researchers have sought multiple methods of increasing food safety performance through training and intervention, but this study suggests that shared agreement of psychological empowerment may be a key factor in improving food safety performance, and in turn, food quality and store revenues. Using data from a national chain of quick service restaurants, this study used groups of restaurant employees’ psychological empowerment as an antecedent to food safety performance, measured in a food safety audit, and found significant support. Moreover, using consumer evaluations of food quality and the organization's store revenue records, indirect and direct relationships among psychological empowerment, food safety performance, food quality, and revenues were found. Theoretical and practical implications are discussed.     

Revenue management strategies under the lunar–solar calendar: Evidence of Chinese restaurant operations

This paper discusses the lunar–solar calendar-driven festivals that affect Chinese restaurant operations. In-depth interviews and a survey were carried out with 50 catering professionals to provide information that was subsequently used to estimate the change of restaurant turnover due to the identified festivals. Four core common lunar–solar calendar-driven festivals that create more demand for dining out across China were identified. They generated extra revenue, which was nearly 10% of total annual business for restaurants. The study also ascertained 21 measures related to revenue management strategies to cope with these demand variations. In addition, a new restaurant revenue management strategy framework was developed. Recommendations based on this study were suggested to multi-functional restaurants and hotel systems.     

To survive or to thrive? China’s luxury hotel restaurants entering O2O food delivery platforms amid the COVID-19 crisis

COVID-19 presents luxury hotels with an unenviable task of maneuvering to secure survival. One of the contingency measures of China’s five-star hotels is to salvage revenues by entering online-to-offline (O2O) food delivery platforms. However, both opportunities and risks will ensue. Study 1 has content analyzed customer reviews on the largest O2O food delivery platform in China to probe the key factors of concern. The results show that taste, freshness, and brand credibility remain salient, as in dine-in experiences, while packaging and delivery quality emerge as a result of the integration of the O2O platform, and hygiene due to the COVID-19 pandemic. Interestingly, interaction quality between restaurant staff and customers still plays significant roles with the online channel. Study 2 has further deepened the understanding of luxury restaurants’ O2O services through semi-structured interviews with F&B professionals. The results have paved the way for hotel operators to employ tactics on O2O platforms.     

How do advertising expenditures influence hotels’ performance?

Existing studies have shown a positive relationship between advertising and hotel room revenue. However, it is not clear through which channel advertising affects hotel revenue. We contribute to the literature by showing that advertising has a significant positive impact on hotel room price, but not on room occupancy. Thus, advertising affects room revenues through room price, not quantity demanded.     

Dynamic pricing and revenues of Airbnb listings: Estimating heterogeneous causal effects

This paper investigates the extent to which the implementation of intertemporal price discrimination affects Airbnb listings’ revenue. We found that on average, a price surge (i.e., increasing the price as we approach the date of service consumption) has an adverse effect on revenue. However, the magnitude of such effect exhibits significant heterogeneity among listings. Through the application of generalized random forests, a causal machine learning technique, we identify exacerbating and moderating treatment modifiers and shed light on the listing dimensions that cause price surges to be particularly detrimental for hosts’ revenues.     

Have restaurant firms been using right recession turnaround strategies?: Evaluating with propensity score measure

Among the diverse strategies that restaurants use in recessions, some studies have shown that strategies that increase advertising, profit margins, or asset turnover have yielded promising results in terms of firm performance. However, the success of these turnaround strategies might be due to the health or size of a firm rather than the implementation of these strategies. Therefore, this study empirically tested this question utilizing the propensity score measure (PSM) due to concerns with selection bias across restaurant segments. The results showed significant improvements in revenue for limited-service and franchise restaurants when aggressive advertising was used but no improvements in profitability. The profit margin strategy had no impact on revenue but affected profitability and stock returns positively for all segments. Finally, the asset turnover strategy had adverse effects on revenue the year after a recession for all segments. These mixed results suggest that managers need to be cautious when implementing recession turnaround strategies.     

Hotel restaurants’ challenges and critical success factors in Klang Valley,Malaysia: the inseparable roles of support centers and revenue streams

Hotel restaurants are of great importance in hotels, and the factors for this have so far been considerably understudied. This study investigated the challenges and critical success factors (CSFs) of restaurants owned and operated by five-star luxury hotels in Klang Valley, Malaysia. Four exemplar hotels were studied and 10 respondents responsible for hotel restaurants’ planning and operations were sampled in this multiple case study approach. A total of 13 challenges were identified, and thematic analysis found 10 common CSFs crucial to hotel restaurants. Among the 10 CSFs, 2 distinctive CSFs were identified playing exceptional roles, including: (1) the inseparable linkage between hotel restaurants and support centers, as well as (2) the inseparable linkage between hotel restaurants and revenue streams. Moreover, this study broadened the retrospective understanding of the term “inseparability” in service organizations, and also contributed several implications for hotel restaurant managers to incorporate into their businesses.     

The indirect gaming contributions of cash and comped casino dining: Does providing complimentary meals pay off at the slots?

This study examined the relationship between gaming volume and restaurant revenue for paid and comped diners; i.e., diners for whom the meal was provided free, using data from two hotel casinos in different markets. The results of time series regression analysis revealed a significant and positive relationship between restaurant revenue and gaming volume in both markets. However, the gaming contribution of comped diners in terms of estimated incremental gaming revenue was much higher than that of cash diners in both markets. These findings confirm the ability of casino restaurants to attract gaming patrons and suggest that providing complimentary meals may be an effective tool to stimulate visits and generate gaming revenue.     

Financial distress in the hospitality industry during the Covid-19 disaster

We implement the stress test methodology of the banking industry in conjunction with a Logit model of bankruptcy with parameters estimated with data from the Great Recession (2008–2013) to predict which firms would face financial distress among Spanish hospitality firms during 2020 due to the Covid-19 disaster. The predictions from both methods rely on the last accounting data available and on the expected revenue drop for 2020. Both methods coincide to predict that 25% of these firms will face a financial distress situation if revenues drop 60%. This forecast raises up to 32% of firms if revenues drop 80%. Financial distress will affect mainly small firms. Most of the firms in financial distress will face solvency problems, with total assets being insufficient to pay all debts.     

The signaling and reputational effects of customer ratings on hotel revenues: Evidence from TripAdvisor

This study aims to examine whether customer ratings and online reviews affect hotel revenues, and if so, to quantify the effects. To achieve this objective, we articulate the mechanisms grounded on reputation theories whereby customer ratings exercise the influence on hotel performance through reputational and signaling effects. Using customer rating data from TripAdvisor and hotel revenue data from Texas, we estimate fixed effects regressions and adopt a regression discontinuity design to separate the signaling effect of customer ratings from reputational effect. We found that the signaling effect of a 1-star increase is an increase of 2.2–3.0% in hotel monthly revenues whereas the reputational effect of a 1-star increase is an increase of around 1.5–2.3% in hotel monthly revenues. Our findings are robust across alternative model specifications and provide insightful implications for hotels to manage their customer ratings.     

Conventions and Gaming in Las Vegas: Friends,Enemies, or Strangers?

As cities look at various industries to strengthen their economies, officials have begun to examine conventions and gaming more closely as they have often been considered “recession-proof.” This study utilizes time series regression to analyze the effects of convention attendance and hotel occupancy on monthly gaming revenues for Las Vegas from 2002 to 2013. Three commonly held opposing viewpoints in trade literature are that conventions reduce, augment, or complement gaming. These viewpoints produced the hypotheses for this study. It was found that convention attendance had no significant relationship with gaming revenue; however, citywide hotel occupancy was found to have a significant positive relationship with gaming revenue. This finding rules out the reduction and augmentation hypotheses.     

To cluster or not to cluster?: Understanding geographic clustering by restaurant segment

This study tested whether geographic clustering differs by restaurant segment due to the differences in consumers’ hedonic and utilitarian values by using Ripley’s K function and a Tobit model. This study found that higher priced restaurant segments have stronger clusters than lower priced restaurants, which implies that restaurants that focus on hedonic values tend to cluster more than utilitarian focused restaurants. However, the results differ depending on whether or not restaurants are located within a central business district (CBD). For example, quick service restaurants have stronger clusters than casual restaurants outside CBDs. Practical applications may apply to new restaurants that are attempting to open. Up-scale restaurants have the advantage of reducing research costs by locating near similar restaurants. Moreover, casual restaurants do benefit by clustering near existing ones under the condition that demand is not severely hurt by competition, while quick service restaurants benefit by diffusing from each other.     

Availability management of hotel rooms under cooperation with online travel agencies

Hotels are required to pay high commission fees when cooperating with online travel agencies (OTAs) to manage online marketing channels. Thus, to maximize their revenues, hotels protect their income through their own (traditional) marketing channels and save on considerable commissions by optimizing room availability for their cooperative OTAs. The present paper proposes a method to manage such availability in the context of a hotel cooperating with an OTA on room booking service. Customers can make reservations directly through the distribution channel of the hotel or indirectly through the OTA, if applicable, during the selling period. The hotel then forecasts room demand base on distribution information after receiving enough room bookings and optimizes room availability with respect to its maximum revenue by determining whether on-hand rooms are available for the OTA. Results indicate when hotel rooms become unavailable for the cooperative OTA. Numerical studies reveal that this method is conducive to the improvement of hotel revenue.     

Marketing Strategies for Last-Minute Travel and Tourism

Abstract

Travel and tourism arranged at the “last minute” has become a growing trend among consumers today. Responding to this trend, more and more travel/tourism firms are offering services catering to consumers seeking last-minute travel and tourism opportunities. Yet, clearly, not all last-minute travellers are alike. Variability in last-minute consumer characteristics such as motivations, lifestyles, and benefits sought suggests opportunities for astute marketers and revenue managers to collaborate in further segmenting the last-minute market and developing more effective marketing and revenue management strategies to potentially increase the firms' revenues, profitability, and customer satisfaction. Toward this end, this article evaluates and discusses marketing strategies, marketing mix elements, and segmentation approaches that may be most appropriate for more effective marketing and revenue management in the last-minute travel and tourism market.     

Online Group-Buying of Tourism Products: Effects of Value and Trust on Site Attachment,Altruism, and Loyalty

Although online group-buying is increasing rapidly, little theoretically based research has been conducted on behaviors of online group-buyers of tourism products. Thus, the purpose of this study is to develop and test a theoretical model examining the relationships among value, trust, site attachment, altruism, and loyalty in the context of online group-buying of tourism products. The results indicate that the six hypothesized relationships among value, trust, site attachment, altruism, and loyalty are significant and thus validate the theoretical model. The findings of this study provide theoretical and practical implications for academics and managers of online group-buying sites.     

Restaurant revenue management: Do perceived capacity scarcity and price differences matter?

Revenue management (RM) has become an indispensable strategic tool in capacity-constrained service industries whose total revenue often depends on the abilities of firms to use capacity efficiently. The restaurant business is similar enough to traditional RM industries such as hotels and airlines, but restaurants also have unique characteristics that pose special challenges to restaurant operators. Among the unique characteristics of restaurants are the relative flexibility of service capacity and the flexible duration of a meal, which are important subjects to be considered in the implementation of RM practices. In addition, when a restaurant operator practices a demand-based variable pricing policy to adjust demand, the magnitude of the price differences may influence fairness perceptions of the policy. Based on the commodity theory and the equity theory, this study hypothesizes that two main effects, namely, perceived scarcity of capacity in a restaurant and price differences, influence the perceived value of a restaurant's offerings and the fairness perceptions of a restaurant's RM practices. As hypothesized, the negative effects of price difference on fairness perceptions are supported by the results. However, findings suggest that perceived scarcity of capacity influences neither the perceived value of a restaurant's expected offering nor the fairness perceptions for a restaurant's RM practices.     

A Preliminary Investigation of NFL Games and Self-Drive Tourism

Abstract

This article addresses the thesis that the presence of an NFL team in a market area creates a unique self-drive (i.e., travel by car) tourism opportunity. Even though the impact of the presence of one or more professional sports teams in a community has been repeatedly studied, the research to date has not looked specifically at the impact on any one industry, or examined the extent to which the self-drive sports fan presents marketing opportunities for the host communities. The purpose of this study is to address these two gaps in the research by investigating the impact of an NFL team's play dates on lodging industry revenue (i.e., occupancy percentage, average daily rate, revenue per available room and total dollar impact) in the market area and to discuss destination marketing strategies to increase lodging revenues by targeting the self-drive NFL fan.     

Dimensionality of ethnic food fine dining experience: An application of semantic network analysis

This study attempts to find the underlying dimensionality in online reviews of fine-dining ethnic food restaurant experiences in Hong Kong. This research adopted semantic network analysis with Clauset–Newman–Moore clustering. Consequently, diverse and specific dimensionality was explored in this research, including ambiance, service, food, drinks, desserts, view, location, occasions, reputation and price. The content of the reviews on five types of ethnic restaurants was different in some dimensions. Marketers of fine-dining ethnic restaurants can select a particular focus when they promote their restaurants, develop menu plan and train staff members. This study implies that the quality dimensions of traditional restaurants may not accurately represent the factual dimensions, thereby resulting in implications for developing a new index of restaurant quality.