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Profit and Revenue Thresholds

Thresholds are predetermined amounts that indicate how much profit needs to be made by the hospitality property to complete the booking. Some hospitality companies only accept function space business if a predetermined profit threshold amount is met for a property event. This mechanism is used to qualify event opportunities at a property based on the event's revenue and profit potential.

The Revenue Manager can override the threshold, approving a quote even if it does not meet the threshold or has a negative threshold profit variance.

Thresholds are defined by revenue managers for function space by days and day parts. For more information, see Defining Function Space Threshold Pricing.

When thresholds are calculated, the following rules are applied:

  • Any time a function touches a day part, even for a few minutes, the function space category threshold value for the day part is applicable.
  • The functions for threshold calculation are considered along with established turntimes.

Example Threshold Calculation with Applied Rules

This example explains the threshold calculation that occurs when three functions take place in the same function space called FSC 1. Table 11 shows the functions and time intervals.

Table 11.  Threshold Calculation for Functions in Same Function Space
Function Name
Function Type
Start Time
End Time
Function Space

Function 1

Meeting

5:00 A.M.

11:59 A.M.

FSC 1

Function 2

Lunch

12:10 P.M.

1:00 P.M.

FSC 1

Function 3

Reception

3:00 P.M.

11:00 P.M.

FSC 1

To calculate the required threshold for each function, the system determines the number of day parts the function touches. The day part is included even if the function only touches the day part for a few minutes.

The system then determines the threshold associated with each of the day parts listed for the function. Table 12 shows how day parts are set up for the property.

Table 12.  Example Setup of Day Parts for a Property
Day Part Name
Start Time of Day Part
End Time of Day Part

Overnight

12:01 A.M.

6:00 A.M.

Morning

6:00 A.M.

8:59 A.M.

Afternoon

8:59 A.M.

12:01 P.M.

Lunch

12:02 P.M.

2:00 P.M.

Evening

2:01 P.M.

6:00 P.M.

Night

6:01 P.M.

11:59 P.M.

Table 13 shows the thresholds that are in effect. The assumption is that function space category (FSC) 1 and 2 have the same threshold amount.

Table 13.  Thresholds in Effect for Day Parts
Day Part
Function Space
Threshold

Overnight

FSC 1, FSC 2

100

Morning

FSC 1, FSC 2

200

Afternoon

FSC 1, FSC 2

500

Lunch

FSC 1, FSC 2

300

Evening

FSC 1, FSC 2

800

Night

FSC 1, FSC 2

800

As Table 14 shows, the required threshold calculation occurs using the following method, assuming the turntimes are zero.

Table 14.  Threshold Calculation for Day Parts and Function Spaces
Function Space
Function
Day Part Touched
Threshold for Function Day Part
Threshold Sum for Function

FSC 1

F1

Overnight, Morning, Afternoon

100 + 200 + 500

800

FSC 1

F2

Lunch

300

300

FSC 1

F3

Evening, Night

800 + 800

1600

Required Threshold

 

 

 

2700

The following exceptions may be applied when the required threshold is calculated.

  • If two functions (from the same quote) exist within the same day part for the same function space, then the day part is only counted once.
  • If a customer requests that two functions be booked within the same day part for different specific spaces, then the threshold is counted for each separate room.
  • If two functions belong to different categories, and both categories share the same component indivisible space, and both functions share a day part, then only the threshold of the larger category is counted.
    
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