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Yield Management in Hotel and Travel Industries

Yield management has become a real buzz-phrase. Often, it’s confused for revenue management. And some say it’s an outdated hotel management model. This article will help you to clear all the myths and help hotel, airline, and travel industry owners understand why yield management is something they need yo consider.

What is Yield Management

Yield management is a pricing model that maximizes revenue by selling to the right customer, at the right time and the right rate. In the travel industry, this typically means selling the right seat to the passenger(s), during the best possible time, for the highest price, to maximize the total revenue. The same concept applies to hotel rooms.

How is the yield calculated?

In the hotel industry, the principle of yield management ensures that the rooms are filled in the most profitable fashion. Thus, the guests will get the apartments at different rates depending on the demand and supply and other factors. Hence the basic mathematical formula is:

Revenue per available room = average room rate X occupancy rate

Yield Management OR Revenue Management?

There is an age-old debate between yield management and revenue management. While the two models are closely related and have a lot of similarities, however, it’s important to note that revenue and yield management are not identical concepts.

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Yield management solely focuses on the selling price and the number of sales. Its ultimate goal is to optimize costs and maximize revenue. On the other hand, revenue management is quite broader in scope. It encompasses the overall strategy and in-depth study and forecasting of consumer behavior.

Why your business needs it

You would think that a hotel jam-packed with people is a profitable hotel. However, it’s not. Most noteworthy, the hallmark of any successful hotel or travel organization is the revenue.

Hotel rooms and flight seats are finite. Thus, unlike at the supermarket, whereby the supplier can increase their profits by quickly baking more bread when demand increases, hoteliers and travel businesses are often limited. However, leveraging the yield management model, they can increase their profits by increasing the rate of the hotel room or flight ticket when the demand is high.

Implementing strategy enables hoteliers to augment the amount of revenue they make from a finite number of flight tickets or hotel rooms. By looking at past trends and performance data, managers can predict demand and plan accordingly.

How your business can maximize profit using Yield Management

Forecasting the demand

As mentioned earlier, yield management is mainly focused on demand and supply. Thus, to set yourself up for successful yield management, demand forecasting is critical. By looking at your hotel or travel business’s past data, you’ll be able to determine future events, long weekends, or festivals, and even more, etc. You will also be able to predict high or low seasons, track length of stay, among many other useful details.

With this data, you can then apply the yield management formula to determine the room or flight ticket price that will give your business maximum revenue. The upside to yield management is that there’s zero chance of making mistakes when calculating the room price. 

Monitor market trends

In today’s digital, fast-paced world, there is high volatility in every industry. Thus solely relying on demand forecasting is not enough. Moreover, it’s important to keep up with market trends—monitor your competitor’s rates, the latest trends of the industry, and other factors. Using this data, apply yield management and be dynamic in your changes. If you follow through, the results won’t be disappointing, and you will undoubtedly be able to grow your revenue quickly.

The ready-to-go solution from Skelia

At Skelia, we have highly experienced .NET experts who have extensive experience in yield management. Over the years, the team has developed several leading applications in .NET technology stack to help maximize business revenue.

Recently, our .NET squad delivered a project which automates the flight repricing process and improves price management flow for one of the largest international travel companies.

Our team works remotely as a dedicated team, using Azure DevOps (visual studio team services) to manage projects and sprint’s backlogs. We are good at what we do, and clients from Europe and the US acknowledge our expertise.
For more details and assistance regarding yield management, feel free to reach out to our expert consultants. Our highly experienced .NET team is ready to help you out.

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