What do airlines, tour operator and hotels have in common? All of them sell fixed time-limited resources. Moreover, when it comes to maximizing revenue from a fixed resource, say, hotel rooms, and a permanently fixed price does not help! Let us find out why. Today, industries like hospitality and tourism face a constantly changing customer landscape, wherein seasonal opportunities like events, contingencies and trends rapidly come and go. Leveraging these opportunities to maximize revenue is only possible with a well-planned yield management strategy. This article focuses on how yield management can be a boon to your revenue maximizing pursuits for your hospitality business. First, let us get to the basics!
What is Yield Management?
Simply put, Hotel Yield Management involves selling the right room to the right customer at the right time. Since competitor price, customer preferences, budgets and demand levels keep changing, a variable pricing strategy also called as dynamic pricing is used to tweak room rates in accordance with the said factors. Consider a scenario involving an impending festival in your city. Since festivals cause an obvious increase in the group bookings, this would call for a specific strategy to tap the group-booking segment. You can adopt a ‘time-penalty’ approach, which involves a gradual increase in price as the date of the festival nears. This way, while getting more booking volume by encouraging customers to book early, you also get to justify a higher price for bookings made later on and drive additional revenue.
How Does it Benefit Hotels?
A robust revenue management system can bring a sales uplift of up to 10%, as per a study. Here are some other interesting findings: • 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.
