Chapter 3: Using Yield Management to Maximize Profit

First off we have to understand what revenue and yield management are as they go hand-in-hand.

Revenue management is used to maximize room revenue based on supply and demand.

Provide customers a better experience

Yield management is used one step further to provide customers a better experience and generate even more revenue. Rather than being based simply on supply and demand, demand is examined over several years in order to determine the demand for a particular product or service. Yield management in hotels is selling rooms and services at the right price, at the right time, to the right people. This is an example of the more specific inventory-focused branch of revenue management that involves strategic control of inventory (rooms).

Variable pricing strategy

Yield management is a variable pricing strategy. Through thorough examination, we learn to understand, anticipate, and influence consumer behaviour in order to maximize revenue. Hotels use this system to calculate the rates, rooms, and restrictions on sales in order to best maximize their return. These systems measure constrained and unconstrained demand along with pace to gauge which restrictions to implement. Some restrictions include length of stay and non-refundable rate.

Yield management teams in the hotel industry have evolved over the last 10 years. As globalization is forcing more competitiveness in the industry, targeting the right distribution channels, controlling costs, and having the right market mix are very important for yield management to generate even greater profit.