1. Introduction 3
2. Revenue Management 5
3. Need for Yield Management 6
4. Inventory Allocation 7
5. Volume Relationships 9
6. Conclusion 11
Yield Management Page 3
A hotel is an establishment that provides paid lodging on a short-term basis. The provision of basic accommodation, in times past, consisting only of a room with a bed, a cupboard, a small table anda washstand has largely been replaced by rooms with modern facilities, including en-suite bathrooms and air conditioning or climate control. Additional common features found in hotel rooms are a telephone, an alarm clock, a television, and Internet connectivity; snack foods and drinks may be supplied in a mini-bar, and facilities for making hot drinks. Larger hotels may provide a number ofadditional guest facilities such as a restaurant, a swimming pool or childcare, and have conference and social function services.
Hotel revenue break down:
Revenue breakdown for full service hotels:
Cost & expense breakdown for full service hotels:
It is an art & science of predicting real time customer demand to
determine the optimal price & availability of a product.Or in laymen terms we can say selling the right product to the right customer at the right time at
a right price thereby maximizing the overall revenue.
In hotel industry yield management is done by the rates the hotel will charge & the no. of
rooms available for each rate based on projected occupancies for a fixed period.
This pricing is based on the elasticity of demand for selectedcustomer segments.
Yield = (room night sold x actual avg. room rate)
(roomnights available x room rate potential)
Take a look at hotel functions:
Director of market/revenue strategy
group strategy/ business evaluation
Property sales & event management- sales & implementation
Therefore we maximizerevenue in hotel by:
Pricing: how to price their product
Inventory allocation: what we put on shelves
Selling strategy: how to sell the product
Requirements of yield management:
Ability to segment markets
Ability to sell in advance
Low marginal sales cost
Booking pattern data
Excellent management information system(MIS)
•Customized software’s & system like oracle, Fidelio
Ability to fence customer segments
An overbooking policy
It is a process of determine how each product will be defined in market place.
Now in order to develop rational pricing we have to look upon these factors.
Who are my customers?
What are they buying?
What arethey willing to pay for the quality offered?
How do they book the room?
What is the quality of my product?
What economic return is desired?
What are my past pricing actions and results of those actions?
What are my roomnights, rate, and mix trends by segments?
What is the state of the economy?
What is the market outlook?
What is demand strength,It’s pattern & it’s consistency?
What my competitors are doing & what will be there reaction?
It is a process to determine how much to make available at each price point
To make efficient allocation a hotelier tries to find out:
How much business is there?
When do customers book & how much/
How much they are willingto pay
Accordingly a strategy is prepared in order to manage demand at 3 levels:
Level 1 :0%-75% occupancy
Level 2 : 76%-80% occupancy
Level 3 : 80%-100% occupancy
Level 1 strategy:
Focus on volume.
Level 2 strategy:
Focus on mix rate & volume
Hotel requalifies special corporate discounts
Limiting discounts in peak time
Level 3 strategy
Focus on rate