Yield management sounds like a scary term. But it’s actually not that complicated. You manage yield by filling your rooms in the most profitable way.
It’s all about supply and demand.
The right guest will be willing to pay different rates for the same room under specific circumstances. They would, for example, expect higher prices during school holidays or over weekends. If you decide to increase your rates because of higher demand, you can make more profit on these rooms over this period. Similarly when it’s low season you might want to lower your prices to encourage more bookings.
In an article written by Glenn Withiam from the Center for Hospitality Research at Cornell University, he writes about the ‘Four Cs’ of Yield Management: Calendar, Clock, Capacity and Cost. We could add a fifth here which we find most important: Customer.
Calendar: When will guests want to stay?
You can predict this by looking at historic demand over the last few years around events in your town or over long weekends. But demand can also be influenced by last-minute factors like a drop in fuel price or a sudden heat wave driving people to the beach for the weekend. Staying on top of what is influencing travel can help you to adjust your rates upward when you expect more demand.
Clock: Make that 18h00 deal.
At midnight tonight, you lose all income from the rooms you didn’t sell today. So when you get a late call from a property in your neighbourhood who can’t accommodate a guest because they are full, make work of it! Offer an attractive rate that will fill up one more room.
Capacity: Don’t leave money on the table.
Group reservations that book out your whole property for a weekend event could make a lot of sense. Unless you are relatively sure that you can book longer stays over this period instead. Make decisions on what works best for you. You might want to restrict group bookings over peak times. Or, you can fill one-night openings in different rooms by moving a guest from one to another. As long as this is done seamlessly, they usually wouldn’t mind.
Cost: Sell at the right price.
Your goal should be to create the biggest gap possible between the running cost of the room, and the price you sell it at. But you should keep in mind that some guests are very price-sensitive. They might not know that your rate is fair, or that it includes all kinds of small touches that makes it worth their while. The balancing act comes in matching what you have available with what the guest will pay. At the end of the day a special rate for the night still is better than an empty room.
Customer: Know what they are looking for.
Understanding your customer and anticipating their needs can help to guarantee a happy stay, a return visit and word-of-mouth marketing to friends and family. If you offer activities, toys and games for kids it might influence families to rather book with you at a slightly higher rate for this convenience. The same can be said for honeymooners who would probably pay a bit more for the petals on the bed and the champagne on ice before their arrival.
Take up the challenge of adjusting your prices on the go after considering these options. We make it easy to do through our new rates grid feature.