Yield Management for Hotels- Ensure Max Revenue

Yield Management is one of the most helpful methods for maximizing your hotel revenue.

As a hotelier, we sell fixed time limit resources i.e. our rooms and their demands keep changing so the fixed pricing strategy won’t work for us and we need dynamic pricing strategies.

So in this article, I am going to discuss the best ways for yield management. This article will help you to find the best pricing strategy and increase your revenue.

Yield Management is the strategy to manage your pricing on the basis of the demand for your products. Proper yield management ensures that you have the maximum possible revenue.

Wikipedia describes Yield Management as

Yield management is a variable pricing strategy, based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, time-limited resource (such as airline seats or hotel room reservations or advertising inventory). As a specific, inventory-focused branch of revenue management, yield management involves strategic control of inventory to sell the right product to the right customer at the right time for the right price.

These two terms are linked very closely together and appear to be the same to many of us.

But they are not the same. Actually, Yield Management is the subset of Revenue Management so there lies a thin difference.

Yield Management is the pricing strategy which deals in generating maximum possible revenue from your available inventory. It empowers you to sell your hotel room at the highest price at that particular instance.

With yield management, you sell your same room at different prices in accordance to many factors like the season when the room is booked, how many days before the room is booked and what is demand at the time of booking.

While on the other hand Revenue Management has more under its domain.

Revenue Management is the strategy to generate the highest possible revenue via any possible method. It can include marketing strategies, growth hacking selling of other services apart from hotel rooms like restaurants, laundry etc.

Inventory distribution is one of the most important tactics of Yield Mangement. You will have to strike the balance between all your distribution channels.

Majorly hotel rooms are booked through two distribution channels and that are OTAs and Direct bookings.

If you allocate more inventory to OTAs then you will end up in giving more commission on your bookings. And if you keep more inventory for direct booking then you can miss booking opportunity and your rooms can go unbooked.

And is why you need so that you get the maximum inventory sale at the best prices.

The demand for hotel rooms depends on many factors. You can have high and low seasons in which the demand can vary drastically.

So you will have to manage your prices smartly in accordance with your demand and that too in advance. Decrease prices in low seasons to ensure the highest occupancy rate and in high demands leverage the situation on your favor.

And this you will have to do the property analysis of your hotel’s booking patterns using BI techniques. This will give an insight into your demand and you can achieve the best possible price for your inventory.

OTAs charge a fortune as the commission on the bookings they bring. And this is hurting the hoteliers as they are giving a large share from their margin to these OTAs.

Top online travel agencies are charging from 15 to 25 % as the commission on hotel online bookings. And this does affect your pricing.

Because OTAs charge such a high commission the profit of the hotels suffers a lot. And due to this, they have to increase their prices.

So hotels should concentrate on the ways to bring maximum direct bookings.

It is very important for you to understand that what will be the result of your action to run a successful hotel business.

You need to inspect what will be the effect on the customers if you make a change in the prices of a particular room type. Will it increase the demand or decrease it.

Many times decreasing the prices is also not a good idea as it will not only decrease your margin but it also related to your value.

If you keep the prices of your room types low then it sends the message at it is the actual value of your rooms. And it is very lethal for you as whenever you raise the price your room will be taken as overpriced.

It is evident that your hotel business needs yield management. By following this awesome practice you will definitely increase your profit.

This was my take on the topic of yield management. Please drop your thoughts in the comment box and also all your suggestions are welcomed.

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