What is Yield Management in The Hospitality Industry?
The hotel industry is actually a dynamic market that requires a lot of planning in order to maximise your return on investment. Yield management in the hotel industry maximises revenue by understanding and predicting guest behaviour.
Hotel Yield Management is the process of selling rooms to the highest revenue-generating customers at exactly the right time. Since customer preferences, budgets, and demand fluctuate constantly, businesses need to adjust prices in order to be competitive.
Changing your hotel’s prices to align with demand and provide the best customer experience can help you increase revenue and reduce your costs. You can do this by providing the same room at different rates, based on factors like occupancy rate, time of year, etc.
Why Is Yield Management Important In The Hospitality Industry? 7 Benefits of Yield Management
Yield management is the process of maximising revenues and profitability by correctly balancing supply and demand. This process can help you maximise revenue from your hotel bookings by ensuring that the rooms are available when they’re needed.
You can increase room occupancy rates by using yield management techniques during busy seasons. And because it’s likely that your occupancy rates will be higher, you can also boost your revenue by accommodating the desires of your customers. There are several benefits of yield management, such as:
1. Increased revenue
Yield management can help a hotel increase its revenue even if they are not at 100% occupancy, which is an important advantage. Hotel owners and revenue managers can take advantage of the demand forecast, maximising the average revenue per available room, per night.
Hotel occupancy rates are highest during the busiest months, so they can charge more in these months. Studies have shown that hotel yield management systems can lead to an improvement in the average daily rate. This is because it provides more efficiency while also saving time and effort. Higher demand also means higher prices, which can lead to increased profit.
2. Decrease Errors
Hospitality is an industry that depends on reviews and relationships. A yield management system allows you to forecast accurately which can help with pricing errors and your credibility. This may also greatly benefit your business, by helping you see changes in the market and act appropriately.
3. Understanding Customer Expectations
Consumers’ tastes vary in this rapidly changing hotel industry, so it can be difficult to maintain a constant level of satisfaction. For example, some hotels have automated systems that save time and effort while others are focusing on providing guests with real and personalised services.
With effective yield management, you can understand customer expectations well and make the right changes in order to serve the right customers. This improves customer satisfaction and helps you stay competitive.
4. Understand booking patterns
Customer behaviours and booking patterns are not all the same. Some customers prefer booking hotels on short notice and some prefer booking their stay months in advance. Hoteliers need to understand the approaches that their customers take with booking. They can then adjust their prices & offerings accordingly.
Hotels already have a mechanism for discounting rates during the low seasons and increasing rates during the high seasons. A system where you can change the price according to booking patterns is another way to make your business more financially viable.
5. Competitive Pricing
You can use competitor pricing to figure out what an appropriate Average Daily Rate would be. This helps you make more profit in the long run so you can start expanding your reach. Many hotels are following this approach and are able to generate more revenue from their bookings, allowing them to better monetize their guests.
6. Increase your value perception
Smart consumers know when something is in high demand and they want to get a piece of it. This is the same with hotels during peak season. Consumers will be willing to pay more because there will be less availability during the peak season.
You can use a variable pricing scheme to build a perception of higher value in the minds of your customers. The sooner they book, the higher the perceived value they have. This helps reach unmet customer demand and has the potential to enhance marketing strategies.
7. Effective Segmentation
The market forecast is key to growing any business. By booking patterns and intentions, you can obtain some insight into the nuances of the market. This type of insight helps with building your strategy for the future.
All year, hotels attract a variety of different guests: solo travellers, families with children, and so on. They can then use this data to identify who they’re missing out on – meaning they can adapt their business model to better suit them. Another benefit of this type of integration is the ability to set a pricing model that caters to different factors based on the guest segment.
Also Read: Advantages And Disadvantages Of Yield Management
What Are the Elements of Yield Management?
The key elements of hotel yield management include:
Group bookings – Managing group room sales is an important part of hotels’ revenue. By capturing data on the behaviours associated with your customers, you can forecast demand for groups and increase your hotel’s profitability.
Transient or FIT (Free Independent Traveller) rooms – Transient rooms have the potential of generating more revenue than group booking as travellers book their rooms on shorter notice at a higher price.
Food and beverage outlets – While catering functions can be revenue generators for a hotel, group events that require both catering and guestrooms are considered more profitable.
Local activities and events – Activities and events in or near your hotel are optimal for boosting revenue – that’s because people want to stay in the area during these times. You should make sure your front office is familiar with any upcoming happenings in the region so they can recommend appropriately priced rooms to your guests.
How to Do Yield Management?
To develop a well-balanced yield management plan, you should create slabs for high and low seasons, according to your hotel’s location, and previous occupancy rates. Whether you’ve booked an occupied room or not, use the occupancy slabs to set your rates based on your past ADRs, RevPAR, and type of guests.
You can make the most of your time with a hotel PMS and monitor your progress in real-time. They give you the reports you need to reach greater success in the industry. It’s important to stay on top of consumer trends in order to keep anticipating demand. It’s also vital for you to check your competitors’ OTA rates regularly as well.
How Do You Calculate Yield Management?
A simple formula to calculate yield is: Revenue Achieved / Maximum Potential Revenue.
The True Potential of Yield Management – Why Does Your Hotel Need It?
As yield management becomes more popular in the hospitality industry, hotels are looking for ways to implement it into their operations seamlessly. With yield management, hotels are able to increase their revenue by understanding the needs of their guests. A hotel’s success is assured when they’ve developed a yield management strategy that feeds on their data to provide a level of accuracy in pricing and increase their occupancy.
It helps you understand which types of guests are coming at certain times and what their needs are by tracking the trajectory of the business. This way, you can adjust your room prices accordingly and focus on making positive changes in the revenue figures. As you can see, yield management can be a good strategy for increasing revenue if implemented correctly.
Revnomix Hotel Data Analytics provides the best yield management service to help you unlock new business opportunities. We help hotels with their needs from data processing, analytics and revenue management. We offer long-term solutions that help our customers manage their businesses. Connect with us today for a free customised demo for your hotel.
Also Read – Yield Performance Analytics – Understanding Demand Patterns in Hotels
Summary
Article Name
Yield Management In The Hospitality Industry: Its Importance & Benefits
Description
Yield management is the process of maximising revenues and profitability. Here are the 7 important benefits of Yield management in the hospitality industry.
Publisher Name
Revnomix Solutions
Publisher Logo
