Travel & Tourism July 25, 2021
Yield Management can speed up the recovery process of the Hospitality Industry
The term yield management might not sound new to people in the hospitality industry and if you are not familiar with it, let me try defining it in a simple language;
Yield management is a pricing strategy often used by hotels to generate maximum revenue from perishable products such as hotel rooms, In simple terms, Yield management is a concept of knowing when to sell a product to the right customer at the time and at the right price;
It is a dynamic pricing strategy for maximizing revenue from a fixed, time-limited inventory, such as hotel rooms.
It’s based on understanding and predicting consumer behavior to influence future hotel guests and generate maximum revenue per available room
It means that you can sell the same room to different guests at different rates, depending on the demand, your hotel’s occupancy rate, the time of year, and many other factors.
Yield management focuses on finding the right balance of supply and demand to get the most bookings at the highest prices. It helps you maximize room revenue and profitability.
But just because it boosts your profitability doesn’t mean it’s not beneficial to consumers as well.
If there are dips in demand, you can use yield management practices to offer rooms at discounted rates and attract more guests. That can lead to even more future bookings, as your customers would be thrilled to have paid less than usual to stay at your hotel.
The same goes for high demand. You can use yield management techniques during busy seasons to increase your room rates because it’s highly likely your occupancy rates will be higher. Hence, you can boost revenue while helping customers make their desired bookings even during high demand.
The primary goal of yield management in the hotel industry is to maximize room revenue.
It’s a data-driven strategy based on forecasting supply and demand to optimize pricing and increase occupancy.
It helps you understand when to raise or lower your room prices to attract guests and meet their needs at the right time, thus increasing sales and yielding high revenues.
A hotel that uses a robust yield management system can be guaranteed of;
- Competitive advantage
- Operational efficiency
- Cost saving
• Decrease Errors: Hospitality is an industry that runs on repute. Accurate forecasting decreases pricing errors. This will benefit both your credibility and forecast results and actions. With a yield management process, you foresee changes and promptly act on them, eliminating any miscalculated risks.
• Mastering your clients’ behavior and expectations: Given how dynamic the hotel business environment is, consumers’ tastes keep wavering too. For example, while some hotels seem to utilize a system full of automated services well, others witness an inclination of guests towards an authentic, personal experience. Effective yield management helps you understand customer expectations well and makes it easier for you to cater to the right customers and carry out price changes driven by customer preference.
• Effective Segmentation: If you focus on catering to a specific market segment for long, you may be missing on other segments that may be equally or more profitable. Yield management will enable you to understand which areas are untapped and enable you to formulate a plan to tap the same. For example, low prices may be offered to leisure-oriented guests who usually book tickets early, as opposed to corporate guests who show up at short notice periods and can hence be charged more.
• Competitive Pricing: When you employ a variable pricing strategy, you eagerly inquire about your competitors’ rates and get a better idea of an ideal Average Daily Rate. Following this approach, you can drive more revenue by focusing on profitable bookings, unlike those hotels that may make the mistake of emphasizing booking volume and lose potential revenue.