Origins of Yield Management
Yield management originated in the airline industry to manage supply and demand for flights, and later expanded into the hotel sector. It focuses on maximising profit from accommodation by selling rooms to the right customer, at the right time and for the right price. Today, hotel revenue managers consider more sophisticated data points such as GOPPAR (Gross Operating Profit Per Available Room) to optimise revenue from not only room sales but also packages, amenities, and services.
Understanding Customer Segments and Pricing
Yield management is about striking a balance between room rates and occupancy, using data to understand customer segments and their price sensitivity. Hotels can then apply this knowledge to seasonal demand and forecast their booking limits, reserving discounted rooms for leisure customers and full-price rooms for business customers.
Yield Management vs. Revenue Management
Differing from yield management, revenue management measures a wider range of variables and encompasses various hotel departments. While yield management is tactical, revenue management is strategic and considers costs associated with sales, as well as secondary spend in areas like food, drink, and merchandising.
Reservations Management vs. Revenue Management
Reservations management is a service role, whereas revenue management focuses on analytics and strategy. Reservations management involves tasks such as assigning room categories, dealing with VIP guests, and updating availability, while revenue management involves analysis of revenue, profits, channels, and distribution.
Effective Yield Management Pricing
Effective yield management pricing involves using data to understand customer segments and their sensitivity to pricing, combined with seasonal demand. Hotels must be aware of their property business mix, as it is critical for better forecasts and more strategic pricing strategies. Understanding seasonality and regional trends can help drive targeted business, catering to different travelling patterns of various customer segments.
Yield management enables hotels to optimise revenue from their existing inventory.
Though yield management predates revenue management, it has a narrower focus, concentrating on pricing and sales volume.
Utilising data to comprehend different customer segments, their price sensitivity, and seasonal demand is crucial in yield management.
The objective is not merely to boost rates or occupancy; instead, it involves analysing various segments to attract the ideal customer at the most suitable time.
Yield management traditionally employs a formula that compares actual revenue with maximum potential revenue.
Yield management systems have been in use since the 1980s, but modern hotel yield management systems now incorporate revenue management strategies.
Balancing pricing with customers' perceived value is essential to ensure a successful yield management approach.