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The dynamic world of hospitality requires maximizing revenue while maintaining a high occupancy rate which is a constant challenge, for these hotels follow a strategy called yield management wherein they optimize their revenue by selling the right room at the right price to the right customer at the right time.
This article introduces the concept of yield management, its importance, and how it maximizes hotel revenue.
Yield management is a variable pricing strategy that anticipates and influences customer behavior to maximize revenue from a fixed or perishable resource like hotel room inventory. Initially adopted by the airline industry, the concept of yield management strategy is widely adopted by the hospitality sector.
Thus, in a world of cutthroat competition yield management is the secret weapon for maximizing hotel revenue without compromising guest satisfaction. A strategic approach that anticipates trends analyzes data, and optimizes pricing.
In short, it’s about analyzing data to forecast demand and adjust pricing strategy accordingly. Hotels sell their rooms at varied prices based on special events, seasonality, booking lead time, and market demand.
Yield management was not born in hotels. Instead, Airlines pioneered it in the 1980s to boost revenue from limited airplane seats with a dynamic pricing strategy. And, when hotels saw the potential, they adopted this strategy in the late 1980s and early 1990s.
With an initial focus on room rates, it rose to adopt data analytics and evolved into revenue management, inculcating broader strategies to optimize total hotel income. Today, with the advancement in software and technology, hotels leverage vast data sets to personalize guest experiences and boost revenue, making yield management a crucial tool in the competitive hospitality industry.
Yield management software is like a smart assistant that helps you maximize your hotel profits. With it, you can analyze vast amounts of data like competitor rates, booking history, local events, peak seasons, and more to predict demand.
With the help of yield management software, you can set dynamic pricing, optimize room allocation, offer targeted discounts, and more - and that too automatically! That’s how it works and the best part is that it eliminates the guesswork out of yield management, thus saving your time and efforts.
Yield management software ensures that you get the most revenue from every room!
Note: With the evolution in technology, the hospitality industry uses different types of robots like guidance robots, concierge robots, food preparation and bartending robots, housekeeping robots, and more to delegate tasks and maintain effectiveness and efficiency. To learn more about the hotel technology and products, check out HotelMinder’s marketplace.
Here’s how you can calculate yield management with a simple formula:
Yield = (Achieved Revenue) / (Maximum Potential Revenue) * 100
Let’s understand this with an example:
Imagine a hotel has 10 rooms with a rate of USD 100 each.
The maximum potential revenue = 10 rooms* USD 100/room = USD 1000.
If the hotel sells 8 rooms at a discounted rate of USD 80 each.
The achieved revenue would be = 8 rooms* USD 80/room = USD 640
Now, the yield is = (USD 640) / (USD 1000) *100 = 64%
Therefore, the hotel filled 80% of their rooms i.e. 8/10, and achieved 64% of their maximum potential revenue.
The key elements of hotel yield management are given below:
HotelMinder, it is about:
HotelMinder, it is about:
Check out the factors that influence hotel room demand:
Below are a few examples of yield management strategies for hotels:
Here’s highlighting the importance of yield management for hotels:
Aspects | Yield Management | Revenue Management |
---|---|---|
Focus | Room Rates and Occupancy | Total Hotel Revenue |
Scope | A narrow scope because it concerns selling rooms at the right price at the right time to the right people to maximize occupancy | A broader scope as it encompasses all hotel revenue streams like restaurants, rooms, and spas and optimizes pricing, product offerings, and distribution |
Decision Making | Focuses on tactical decisions like adjusting room rates based on demand daily | Strategic decision making like investing in new amenities, revenue-generating packages, and more |
Data Analysis | Analyzes competitor rates, historical booking data, and local events to predict room demand | Analyzes data sets like spending habits, guest demographics, competitor offerings, and more |
Example | Offers a last-minute discount on a room to fill an empty vacancy | Adding spa services and meals to a room at a discounted rate to attract weekend getaways |
If you’re trapped in between framing yield management strategies to maximize revenue for your hotel and the outcome still comes out to be complex, fret not! HotelMinder’s team of highly enthusiastic and adept hospitality experts is here to take your hotel revenue to the next level. We ensure that your guests have a delightful experience that makes them come back to you again and again.
Ready to build a strong rapport that leads to repeated stays and direct sales?
Swati is an accomplished content marketing specialist who focuses on developing valuable and practical content that addresses the concerns of hospitality businesses end-users.
HotelMinder is a leading advisory agency for hoteliers to maximize business performance with hands-on advisory & project management services; a free and unbiased hospitality knowledge platform with Tech, Marketing, Revenue and Operational content; and a marketplace for professionals from all over the world to find hospitality specific software and services that best match their vision and requirements.
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