Yield Management

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Yield Management
Week 5
Learning Outcome
• To understand the yield management and techniques to maximise the
revenue
Yield Management
• Yield Management is the process of planning to get the best possible
revenue returns from letting accommodation, by maximising the
hotel’s occupancy (the number of rooms sold) and in given period at
the best possible rate
• There are various pieces to the yield management ‘jigsaw’. You can
increase the hotel’s revenue either by securing higher occupancy
(letting more rooms) or by raising the rate at which you let rooms –
but if you can do both, you get the best possible returns
Decisions involved in yield management
• The profitability of different types of businesses
• Advance bookings
The profitability of different types of
customers
• Corporate account holders – especially those who are prepared to
guarantee a certain volume of bookings per year, may have
negotiated from 40 to 90% of rack rate, depending on volume
• Travel agents and tour operators commonly charge a 10-20%
commission on accommodation bookings, depending on volume,
which is effectively a discount on rack rate
• Independent leisure guests are nowadays likely to be quoted ‘best
available rates’ in return for guaranteed advance bookings or online
bookings
Market characteristics
• Business customers tend not to be ‘price sensitive’, that is, their
choice of hotel isn’t mainly driven by competing or charging prices
• Leisure customers are generally more ‘price sensitive’ because they
are paying their own bills, they have a longer planning path to make
price comparisons and go ‘bargain hunting’
Advance bookings
• Guaranteed advance bookings offer stability and secured revenue for
the hotel, and again, different market segments
• Leisure travellers tend to book in advance, when they plan their
holiday arrangements
• Group tours tend to have particularly long planning paths because
they need to reserve large blocks of rooms, they might make
reservations up to 2 years in advance
• Business travellers tend to make last-minute bookings, because
business trips are scheduled at short notice
How to forecast
• How to forecast pricing strategy:
• Price last night. Prices can change day-to-day
• Demand. Depends on the demand
• Times can also change the pricing demand (Morning low later higher)
• It’s all about what the guests want
• Season holidays (half term, weekends, bank holidays and big holidays)
• Same group bookings from the year before .. are they back again
How to forecast
• You can also do the ADR to have a minimum (£90 x 90%)
• These also play a big part in terms of price forecasting:
• Location (city/out-side the city, transport links)
• Level of service
• Star rating
The role of Internet
• Online bookings
• Website
• Online reviews i.e. Trip Advisor
• Mobile applications
• Google ads
• SEO
• Google rankings
• Blogs

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