So, let me start with a question. What do you think is the center of each hotelier’s concerns? Is it occupancy? Is it happy guests? (Well, definitely that’s a must!) Is it more bookings? Now let me tell you, that whatever answer you might have; it leads to one and only one factor, that is Maximized Revenue or Increased Yield. In other words, it all revolves around yield management. (It’s a familiar term, I know!)
Now, what exactly is Yield Management?
Yield Management can be defined as, selling a product or service to the right customer, at the right time, and at the right price. In the hotel industry, the process of determining right hotel room pricing is called “yield management strategy”. Hence, the concept of yield management can be summarized in 3 R’s. (giving the Right Rate to Right Customer at the Right Time)
Yield Management v/s Revenue Management
Now you’ll say that Yield Management looks the same as Revenue Management. But naturally, anyone would think on the same lines. Although, there’s a thin line of difference between both.
While talking about Yield Management for hotels, it only encompasses the revenue generated through the room charges or occupancy, whereas Revenue Management involves a whole lot more than just occupancy.
Digging a bit more into it, let’s find out how yield is calculated
The purpose of yield management in the hotel is not to simply vary the room rates or to increase the occupancy percentage. More precisely, it is to maximize the average revenue per available room, per night (what you call it as RevPAR). Before it seems all GREEK to you, here’s a basic yield management formula.
Yield % = Achieved Revenue * 100/Potential Revenue
Let’s play with numbers for more clear insight.
Suppose your property has 10 rooms, and revenue per available room is 50$, so consider these two cases:
