Yield management is something that the larger hotel chains implement as part of their normal business procedure. They understand that a small increase in booking rates can contribute significantly to their overall yield. For example, a 1% yield can represent up to a 30% increase in net proft.
However, many smaller accommodation providers struggle with yield management. From our experience, it is because they either:
a) don’t know what it is and therefore, don’t implement it at all; or
b) know what it is, but don’t have enough time to do implement it; or
c) have implemented a yield management strategy but don’t do it as effectively as they could.
This article discusses how many smaller accommodation providers are leaving money on the table because they are not maximizing their potential revenue to the level that they could. I will then go on to talk about what both smaller (and larger) accommodation providers can do to combat this common issue.
Before we get started, if you are unsure of what Yield Management is, take a look at this article that I wrote earlier: Example of Yield Management
Don’t know what Yield Management is or don’t have the time
Surprisingly, a number of smaller accommodation providers are not aware of what yield management actually is and those that do know do not have the time to prepare a strategy, yet alone implement one. Running a hotel or resort is busy work and for most operators, the running of their business takes up most of their time. Therefore, there is little time for managing their properties’ yield.
Don’t manage yield as effectively as they could
Many of smaller accommodation providers don’t adjust their rates at all, apart from setting their seasonal rates.
Granted, setting rates for seasons is a form of yield management in itself. However, it is far cry from what many professional yield managers would consider to be proper yield management.
Another form of ineffective yield management is to offer rooms at distressed rates. Unfortunately, this does not always make good economic sense. Unless the hotel in question has a solid strategy to ensure they make extra revenue from the bar, restaurant or from the tour desk.
Of course if this is the case, an effective marketing plan starting at the front desk needs to be implemented. There is no use selling rooms at the distressed rate in the ‘hope’ that extra revenue will be generated in other areas of your business. Generally, selling rooms at low rates for the sake of filling rooms is not always a good idea without the right strategy in place.
So what is effective yield management?
An effective yield management strategy should be able to respond to market demand, quickly. For example, if there is an influx of room bookings on a particular date, operators should increase their rates to capitalise on the increase in demand. Conversely, if rooms are not selling, the rates should be lowered to sell more rooms at a lower rate.
Why timing is everything!
Responding to demand is the key to effective yield management. The problem is that in order to do this effectively, accommodation providers should be making those adjustments to rates as soon as there is an influx in reservations. However, as discussed earlier, this can be difficult for smaller operators to keep their eyes on all the reservations that come in, and therefore lack the ability to respond effectively to demand.
For example, a hotel may receive a large number of bookings because of a concert that is coming to town, or a popular football game that is going to be played. This can result in their rooms being booked out (possibly even in low season). Once the hotel is aware of the event, it is usually too late to increase their room rates because of the increase in demand. And has therefore lost out on making additional revenue from the rooms.
What Larger Accommodation Providers Do
Larger accommodation providers have the ability to respond to demand because they have employees that manage their yield manually. However some try to ‘predict’ market demand by using historical data. The problem with using historical data is that it cannot possibly ‘predict’ what new events, attractions, etc are going to be on tomorrow, the following week or even month.
What would it be like if you could completely automate your yield management?
Now accommodation providers can automate their yield management by using Allotz Autopilot – the world’s leading real-time channel and yield manager. Our system ticks all of the boxes when it comes to effectively managing hotels’ and resorts’ yield. It is a true set and forget system that operates with patented mathematical algorithms that ensure that you are selling your rooms at the right price – every time.
Simply enter your distressed rate, your current rate and your rack rate, and let Allotz Autopilot run. It will increase your reservations, increase revenue and save a mountain of time.
Arrange for a demo of Allotz Autopilot today. It may be the best business decision that you have ever made.