Yield Management Hotel: Winning Strategies to Help Boost Your Revenue

Regardless of your hotel’s size, the main business goal is to provide a great guest experience. Being able to dynamically change your hotel’s revenue-generating strategies is essential.

This is why hotel yield management is a principle every hotelier must consider. It serves as the right fuel for hotels to utilize the right price points in each hotel room.

Efficient yield management helps revenue managers generate the best pricing strategies to maximize their occupancy, profitability, and revenue. This guide discusses how hotel yield management fuels your business and ideal strategies to help you get started.

What Is Yield Management in the Hotel Industry?

Yield management is solely based on selling the right hotel rooms to customers for the right price at the perfect time. In the hotel industry, this leads to significant revenue maximization.

Moreover, yield management is also based on the theory of demand and supply. Generally, depending on certain factors like popularity, guests are willing to pay different amounts to get the same thing. This means you can change your room rates to increase your revenue.

Failing to leverage yield management strategies results in lost opportunities in the following aspects:

• Offer promotions and competitive rates
• Receive more bookings
• Better forecasting of the demands in the next booking season
• Increase your revenue per booking

If you want more profit, you must sell the right amount of rooms that can cover costs on fixed operations. Then, you may start selling the retaining rooms at higher prices to maximize your business’s overall profits and revenue.

You might think that yield management works similarly to revenue management. And you’re correct, but there’s a thin line of difference between these pricing strategies. Revenue management covers a broader aspect of boosting your hotel’s revenue besides room occupancy.

On the other hand, yield management focuses mainly on revenue earned from room charges or occupancies. It’s also a subset of overall revenue management, prioritizing finding the right balance of demand and supply for your hotel rooms. You will know you have achieved the correct balance when your prices match guest demands.

The Key Elements

Hotel yield management has four key elements:

1. Group room sales—generates high revenue for your business. Consider evaluating and collecting data such as lead times, booking trends, and demand forecasting.
2. Transient rooms—can generate better revenue than group room bookings because guests reserve these rooms closer to their arrival dates. You can also offer them at discounted rates during low demand.
3. Food and beverage outlets—can impact your room revenue through catering services and reservations.
4. Other events and activities near your hotel—always stay updated with recent events near your hotel and leverage them to maximize room occupancy.

What Are the Benefits of Yield Management in the Hotel Industry?

Aside from harnessing higher demands for your rooms, yield management has several benefits for your business operations. Let’s examine the most critical ones to help your property earn more.

Lower Errors and Higher Revenue

Yield management involves accurate forecasting of the room demand and supply in the market. This can help mitigate avoidable and miscalculated risks or human errors that affect how customers view your room rates.

The fundamental aspect of yield management is maximum occupancy. By considering market factors and making recommendations, yield management software allows hoteliers to set the best prices during fluctuating market conditions.

Understand Guest Expectations Better

Different customer segments will have different needs, which can change over time.. Ensuring a sustained level of satisfaction for your guests is challenging.

Effective yield management helps you understand guest expectations better by recommending pricing changes that will cater to the right group of customers. These changes can also help your hotel stay competitive in the market.

Relying on Customer Booking Patterns, Segments, and Perception

Like expectations, customer booking patterns and behaviors are also different. You might observe some guests booking rooms on short notice and customers booking months in advance. You must leverage these differences to use various approaches in adjusting your room prices.

You must also allocate enough resources to evaluate current market trends and hotel performances and correlate them with your customer segments. Consider the following questions:

1. Who are your loyal and new guests?
2. When do your customers book?
3. How long are their preferred length of stay?
4. Are your guests willing to pay more?

These questions allow your business to better adapt to changing value perceptions. And they can make you target the right audiences better and faster.

Offers A Flexible Nature

Yield management offers the flexibility you won’t find in any other pricing strategy. And this is a win-win for both the business and the customers. For instance, a drop in customer bookings can be a way for hotels to generate effective yield management techniques to increase occupancy by offering rooms at discounted rates.

That way, you can still earn enough revenue even when it’s not as high as during peak seasons. The customers are happy with the discount, and you get the occupancy you need.

Easier to Employ

Yield management is one of the simplest strategies with a significant impact. And it’s fairly easy to employ than other business strategies. Moreover, hiring an extensive team to work for it is unnecessary.

In today’s digitization, you only need the right tech tools for effective yield management. Utilizing the right hotel revenue management system allows you to yield the best prices quickly.

The reservation or the general manager normally handles yield management in smaller hotels. While for larger ones, hoteliers often hire a separate data analyst and a hotel revenue manager.

Efficient Resource Allocation

Yield management helps hotels allocate their resources, including room inventory, more efficiently. Hotels can determine the optimal mix of room types and rate categories by analyzing demand patterns and historical data. This ensures that hotels offer the right rooms at the correct prices, minimizing wastage and maximizing revenue potential.

How to Implement Yield Management for Hotels

The right room rates are probably the most critical aspects of any hotel. And you can only achieve this when utilizing a robust pricing strategy that boosts room occupancy, profitability, and overall revenue.

Yield management ensures hotels can sell their rooms strategically at the most optimized rates. And for an effective result-driven strategy to take place, the following steps are critical.

1. Decide the occupancy slabs.

Occupancy slabs are affected by three major factors: seasons, location, and occupancy. Let’s examine each principle below

Based on Seasons

There are high and low hotel seasons. You can identify the maximum occupancy during off and peak seasons by comparing the data with the average occupancy year-round.

You can also analyze the following:

1. Major festivals
2. Long weekends
3. Public and annual holidays
4. Local events
5. School holidays

These factors can let you create smarter occupancy slabs for increased revenue.

Location

The next factor is most effective when your hotel is near a central convention center or stadium where recurring events often occur. These events can be cricket tournaments, events, and other expos.

Generally, your hotel receives more bookings during the dates of the said events. Why not take advantage of these dates and list them in advance? As the dates grow near, apply your yield management strategy. It’s also a good time to vary your occupancy slabs and room rates.

Occupancy

Occupancy also factors in past guest bookings. This allows you to generate more profitable rates during the low season instead of leaving them unsold and vacant. Evaluating past data lets you determine the minimum and maximum occupancy levels to create wiser slabs.

2. Decide the Room Rates as per the Occupancy Slabs

The next step is deciding how much you will charge the rooms for each slab. And several factors also exist: guest types and your past RevPAR and ADR.

Guest Types

It’s no surprise that your hotel won’t be catering to the same type of guests forever. You will welcome a variety, including corporate guests, solo travelers, backpackers, family, large groups, and more.

In general, different customer segments will have different demands and expectations. For instance, corporate guests will normally stay longer, meaning they want more affordable rooms that make them comfortable.

You must also consider the guests’ booking habits. Setting the room rates based on your customers’ behavior and booking patterns will allow you to maximize room occupancy and profitability.

Based on Past RevPAR and ADR

RevPAR and ADR are critical parameters that can largely determine how high or low your revenue will be. Evaluating past and current data about these factors will allow you to assess room rates that can help maximize your RevPAR.

3. Constant Monitoring and Updating of Yield

The next step is critical because it involves monitoring, evaluating, and deciding based on market trends. Even when your occupancy slabs are perfectly organized, they are useless without studying past and current trends in your industry.

Moreover, pricing should be dynamic in hotels. This means monitoring market trends involves looking through your competition’s rates. Before increasing or lowering your rates, evaluate the prices of your hotel competitors. It makes it easier to have a prototype ready when predicting future rates.

4. Let Data Guide Your Decisions.

Regardless of the strategy, always rely on data. Start preparing baseline room rates for the succeeding year by looking at the following information:

• Market conditions
• Booking pace
• Historical demand
• Unconstrained demand for your rooms with an unlimited inventory

It’s also important to constantly monitor your current pricing decisions and their impact on your current revenue. Use what you learned to create better strategies in the future.

5. Practice Dynamic Pricing

Fixed pricing has always been the norm for the longest time. But this does not generate as much revenue as dynamic pricing. Dynamic rates allow you to adjust the prices during high and low seasons based on guest demands.

6. Implement Stay Restrictions

You don’t always have to set high rates on peak nights. Why not consider implementing stay restrictions, such as MinLOS (minimum length of stay) or CTA (closed-to-arrival), to boost your occupancy, especially on shoulder nights.

7. Vary Your Pricing

Charge your rooms depending on the amenities they offer. If a suite has a huge space, a beautiful view, a spacious balcony, and a more comfortable bed, setting it at a higher price is justifiable. Varying your price points ensures you have appealing rates for all guests and budgets. You can also consider the following:

How Demand Affects Yield Management for Hotels

Employing the right hotel yield management strategy depends on high and low demand periods. Demand for hotel rooms largely depends on factors such as seasonality, travel behavior of potential customers, and availability and attractiveness of alternative accommodation options in your area (e.g., Airbnb, hostels, camping, other hotels, or motels).

You must also consider the types of customers that your hotel or resort attracts. Leisure travelers, business travelers, locals, international and domestic tourists, and others have different needs and wants. In addition to customer types and travel behavior, external factors can affect demand to consider, like the area’s economic situation, political stability, crime rate, environment, culture, and more.

Balancing Profitability and Revenue

Of course, when demand is higher than supply, hoteliers are able to raise prices on in-demand rooms rather safely. Striking the right balance between revenue and profitability to maximize the occupancy level of your hotel is key. Aside from considering the qualitative aspects listed above, there are quantitative financial supply and demand factors to consider, including:

• Market EquilibriumThe equilibrium price is the point where demand and supply intersect, which results in a clear market price. This can vary based on seasonality, location, customer segment, and type of hotel. Using the aforementioned data, hotel yield management systems can calculate the equilibrium price.
• Market TrendsChanges in the market can affect the supply and demand curves, which affects the equilibrium price. Yield management software like HouseCount RMS can analyze the historical and projected data based on a wide range of changing supply and demand factors and dynamically offer the best price for each room type.
• Market OpportunitiesThese market changes can also present new growth, profitability, or differentiation opportunities in the market. Comparing current and future market trends is important to identify potential gaps or niches in the market that you can take advantage of. For instance, underserved customer segments may appear, allowing you to shift your hotel’s marketing strategy to attract this underserved market.

Your price points must be able to adjust based on these demand factors to boost your room occupancy, profitability, and revenue.

The below table breaks down ideas on how to adjust your strategy based on whether you’re dealing with high or low demand periods.

Prospects From Yield Management in Hotels

Yield management is still not the norm in most hotels. And because it’s a relatively new concept in the industry, hoteliers and revenue managers must be aware of its prospects and advantages in the coming years. Let’s take a look at a few prospects from yield management hotel strategies.

One-to-One Revenue Management

Luxurious hotels and larger establishments will shift to one-to-one revenue management. This involves each individual as a market segment. And with the help of innovative tech tools, it will be easier to calculate the total customer value and potential spending based on past and future trends.

This way, revenue managers can find setting the best room rate and availability for potential guests less challenging.

Total Customer Value Integration

The future of yield management will also involve prioritizing total customer value and revenue generated from each available guest. This means more revenue management systems will depend on the value generated by each individual guest.

Function Room Yield

Aside from total customer value, future yield management will also focus on yielding and forecasting function space for hotels and significantly more prominent companies.

Cost of Business Analysis

We are also looking into channel costs getting incorporated into inventory and rate decisions because you must remember that different channels and revenue streams will yield different profits.

Goal Alignment

Aligning the goals of each segment is critical in achieving what you want for your hotel to maximize your property’s full potential.

How HouseCountRMS Can Help With Hotel Yield Management Strategies

HouseCountRMS is a revenue management system specifically designed for hotels. It optimizes hotel room inventory and pricing decisions to maximize revenue and profitability. HouseCountRMS can be a valuable tool for implementing effective hotel yield management strategies. Here's how HouseCountRMS can help.

Demand Forecasting

By leveraging historical data, market trends, and other factors, HouseCount RMS is able to forecast future demand accurately. By understanding the expected demand patterns, hotels can adjust their pricing and inventory strategies accordingly. This allows them to capitalize on high-demand periods and optimize revenue during low-demand periods.

Dynamic Pricing

HouseCountRMS employs sophisticated algorithms to dynamically adjust room rates based on real-time demand and supply conditions. The system considers factors such as occupancy rates, competitor pricing, market conditions, and booking patterns.

By constantly monitoring these variables, HouseCountRMS can optimize room rates to maximize revenue and profitability.

Inventory Optimization

HouseCountRMS helps hotels optimize their room inventory by recommending the right mix of room types and rate categories. The system considers factors such as historical booking patterns, customer preferences, and market segmentation to suggest the most profitable allocation of room inventory.

Distribution Channel Management

The software integrates with various distribution channels, such as online travel agencies (OTAs), global distribution systems (GDS), and direct booking channels. It gives hotels insights into channel performance, booking patterns, and customer behavior across different channels.

This information enables hotels to make informed decisions regarding distribution channel selection and inventory allocation.

Reporting and Analytics

HouseCountRMS generates detailed reports and provides analytics that helps hoteliers evaluate the effectiveness of their yield management strategies.

Hotels can analyze key performance indicators (KPIs) such as average daily rate (ADR), revenue per available room (RevPAR), and occupancy rates to assess their performance and identify areas for improvement.

Automation and Efficiency

HouseCountRMS automates many manual tasks involved in yield management, such as data analysis, pricing decisions, and inventory allocation. This saves time and reduces the risk of human errors.

Hotel staff can focus on strategic decision-making and customer service, while HouseCountRMS handles complex calculations and optimization processes.

Conclusion

Hotel yield management is a crucial strategy for optimizing revenue and profitability in the hotel industry. It strategically adjusts room rates and inventory allocation based on demand patterns, market conditions, and customer behavior.

By implementing effective yield management strategies, hotels can maximize their revenue potential, increase occupancy rates, and achieve higher average daily rates (ADR).

A robust yield management hotel strategy enables hotels to capitalize on high-demand periods by implementing higher room rates and minimum length of stay restrictions. Conversely, hotels can employ pricing strategies such as discounted rates, promotions, and package deals during low-demand periods to attract more customers and fill their available rooms.

HouseCountRMS can significantly enhance yield management hotel strategies by providing accurate demand forecasting, dynamic pricing capabilities, inventory optimization recommendations, channel management insights, reporting and analytics, and overall automation and efficiency.By leveraging these features, hotels can make data-driven decisions to maximize revenue and achieve their financial goals. Request a demo today to get started with HouseCount RMS and to learn more about how it can help with yield management hotel.