How can you use yield management to increase revenue in the hospitality industry?

1 What is yield management?

Yield management is a method of managing your inventory and pricing to match the demand and supply of your services. It is based on the principle that different customers are willing to pay different prices for the same service at different times. For example, a business traveler may be willing to pay more for a hotel room on a weekday than a leisure traveler on a weekend. By using yield management, you can segment your customers based on their price sensitivity, booking behavior, and preferences, and offer them different rates and availability accordingly. This way, you can increase your revenue by selling more rooms at higher prices when the demand is high, and filling up your rooms at lower prices when the demand is low.

2 How to implement yield management?

To implement yield management, you need to follow four steps: forecasting, pricing, inventory control, and performance measurement. First, you need to forecast the demand and supply of your services for a given period, based on historical data, market trends, and external factors. Second, you need to set your prices based on your forecast, your costs, and your competitors' prices. You can use dynamic pricing, which means changing your prices according to the changes in demand and supply, or differential pricing, which means offering different prices to different customer segments. Third, you need to control your inventory by allocating a certain number of rooms to each customer segment and each price level. You can use overbooking, which means accepting more reservations than your capacity, or capacity management, which means adjusting your capacity according to the demand. Fourth, you need to measure your performance by tracking your key indicators, such as RevPAR, occupancy rate, average daily rate, and customer satisfaction.

3 What are the benefits of yield management?

Yield management can bring you several advantages, such as increased revenue, improved customer satisfaction, and a competitive edge. By utilizing yield management, you can sell more rooms at higher prices when the demand is high and fill up your rooms at lower prices when the demand is low, which can increase your RevPAR and your profit margin. Additionally, you can offer customers different options and incentives based on their needs and preferences to enhance their loyalty and satisfaction. Finally, by using yield management, you can differentiate yourself from competitors and attract more customers. You can also respond quickly to changes in the market and adjust prices and availability accordingly.

4 What are the challenges of yield management?

Yield management can be challenging, particularly when it comes to data quality. Accurate and reliable data on demand and supply, costs, and competitors is necessary for successful implementation. Additionally, customers must be informed of prices and availability in a transparent way to prevent them from feeling alienated. Lastly, organizational alignment is key to yield management efficiency; staff and partners must be trained on how to use the tools and techniques.

5 How to improve your yield management skills?

If you want to improve your yield management skills, you can learn from the best practices and case studies of other successful hospitality businesses, use software and tools to collect, analyze, and manage data, prices, and inventory, and seek feedback from customers, staff, and partners. Yield management is a powerful strategy that can help increase revenue and customer satisfaction in the hospitality industry. With the steps and tips provided in this article, you can begin applying yield management to your business and reap its rewards while navigating its challenges.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?