I often get asked about yield management in relation to hotel room reservations. In particular, exactly what it is and how can it be done effectively.
For an explanation of the definition of Yield Management, be sure to read my blog for a definition: How to Set Your Hotel Room Rate with Yield Management
To better explain Yield management, I have written a scenario so that you can get an idea of how you can capitalize on Yield Management by understanding and applying these principals. This scenario is based on a number of clients' experiences where we have helped.
Let’s look at a scenario from the perspective of Terence, who manages reservations at The Royalty Hotel in Singapore.
Last Friday, in The Royalty Hotel’s low season, a popular international band named ‘Candy Street’ advertised their concert to be held in Singapore. Candy Street are so popular that the tickets were sold out within 2 hours. Concert goers from around South East Asia then required accommodation to see their favourite band. This led to a huge demand for hotel rooms throughout Singapore.
What Terence Did
Terence knew nothing about Candy Street's concert. Consequently, The Royalty Hotel’s rates remained as advertised at $150 per night - the normal low season rates.
Terence sold 30 rooms at this rate. That means The Royalty Hotel’s gross revenue was $4,500. I am sure that you would agree, it is not a bad yield. But it could have been a lot better.
What should have Terence done?
For effective Yield Management, Terence should have increased his rates to meet the demand so he could make greater profit (Yield).
Let’s say that Terence sold 10 rooms for the standard $150, then increased the rate to meet demand and consequently sold the remaining 20 rooms at $170
That means the total revenue:
a) for the first 10 rooms sold would be $1,500; and
b) for the remaining 20 rooms would be $2,400.
Which gives a total revenue of $4,900
So Why Didn’t Terence Increase his Rate?
The simple reason why Terence did not increase his rate, was because he did not have the information there was an increase in demand.
To have effective Yield Management, up to the date information is required – so that you can react quickly to supply and demand.
How Do You Get Up To Date Information?
This is the issue with Yield Management. To manage your hotel and keep an eye on reservations can be very time consuming. Not to mention, if you did have the up-to-date information the time it takes to adjust your rates, you can be reacting too late.
Large hotel chains understand profitability and take Yield Management seriously. So serious in fact, that many hotels have Yield Manager Employees to take care of this issue. But for most operators, the cost of hiring additional employees or outsourcing their Yield Management is simply out of the question – especially for single hotel operations.
The Solution to Hotel Room Yield Management
Now all hotels can enjoy Yield Management without the need to hire additional Employees. Allotz Autopilot is the world’s leading channel manager that has integrated Yield Management – so it can increase rates when demand is high – it reacts fast to capitalize on profits!
All you do, is input your lowest acceptable room rate (distress rate) and your current rate, and Allotz Autopilot will automatically set your rates for you!
What this means is that you can take advantage of market demand by allowing Allotz Autopilot to adjust your rates automatically.
Sure, other channel managers will sell rooms, and keep selling at the same rate, like Terence experienced. However with proper Yield Management, your business can become a lot more profitable and thanks to Allotz Autopilot, it can be a fully automated process, so you can get on with business.
Don’t leave revenue on the table. Arrange for a demo of Allotz Autopilot today.