Yield management, also known as revenue management in hotels, involves the ability of a hotel to generate the optimum amount of revenue through the appropriate sale of the right room to the right customer at the right time at the right price. It also enables individual hotels to set the best possible price and space their rooms in a way that would yield the highest occupancy and profitability. Here, we will look at the 7 yield management strategies that are relevant to hotels and that can help generate the most revenue.

7 Best Yield management Strategies for Hotels

1. Variable Prices Depending on Demand

Real-time adjustment of room prices is one of the most basic yield management techniques that hotels employ to increase the revenue per available room (RevPAR). This strategy entails dynamically adjusting the rates, taking into consideration factors like customer feedback, special occasions, trends on booking frequency, and concurrent actions by other players in the market.

How It Works: During business peaks, such as the holiday season or large events, guests are willing to pay higher prices to secure a room. On the other hand, in periods of low traffic, decreasing rates improves the probability of attracting more guests who may be sensitive to cost.

Tip: Utilize revenue management software that automatically adjusts prices depending on current rates and demand, guaranteeing you the best values for your business.

2. Segment Your Market

One of the most effective approaches that every business should consider is Segmentation which really works because it entails splitting your potential guests into neat categories based on their needs, level of activity, and their ability to pay for the services. Thus, while trying to identify each segment’s needs, such as business persons, leisure tourists, or groups, hotels are able to adjust price and service to achieve the highest earnings on every segment.

How It Works: Crossover some segmented packages or have cross price discounts for assorted segments. For instance, business travellers may find standard rate with early check-in and late check-out perfect while the leisure traveller may find weekend break with some extras such as spa treatments ideal.

Tip: In assessing the results of each segment, make sure also to adjust offers correspondingly to gain the optimum revenue from all other guest categories.

3. Length of Stay (LOS) Restrictions

Another very successful yield management technique is the Length of Stay restrictions. This is a technique through which a hotel establishes the lowest or the highest number of nights that a client has to book in order to stay in the hotel during peak seasons.

How It Works: Some hotels may employ a minimum LOS restriction during peak periods in a bid to avoid occupancy from short term clients, which may lock out longer term (and possibly more lucrative) guests. In the same way, it entices guests to pay special rates, and stay for a longer period during the low seasons to ensure a room is occupied.

Tip: Identify booking patterns in order to put restrictions on LOS tactically with regards to the periods which might be damaging the overall occupancy.

4. Overbooking Strategy

Overbooking is a yield management strategy most commonly used in the hospitality industry, which means that hotels provide more rooms than the total number of available rooms to a client base with the assumption that some of the people who made a booking will cancel or fail to turn up. This strategy incurs a small amount of risk, but can greatly increase revenue, so long as it is used appropriately.

How It Works: There is usually bound to be an element of those cancellations or no-shows so it’s wise to overbook your hotel in order to maximize occupancy. However, it must be planned for such conditions as the presence of all guests, for example, cooperation with nearby hotels in case of additional bookings.

Good communication with guests helps to avoid dissatisfied guests if they are offered to be taken to another hotel.

5. Prize product discounts before a certain time (Early Bird) and at the end of the sales period (Last Call)

There is also the various ways of making it necessary to ensure occupancy including early bird prices and the last-minute offers depending whether a guest in a hotel books many months or perhaps weeks before a stay.

How It Works: Early Bird Discounts: Other promotions could include offering guests a lower concession rate for booking a room several months before their required time of check in. This helps achieve better advance occupancy of the rooms therefore more control in the management of the rooms for the hotels involved.

Tip: Always balance your promotions with those products and services in order not to reduce the going rate for your ware. You should, therefore, consider market demand and the booking rate when applying the mentioned approaches.

6. Use OTA Channels (But Not Overreliance On Them)

OTAs are important contributors to direct bookings of hotels since its guests seek a hassle-free experience and options. Therefore, FM strategies of yield management should employ OTAs to sell the rooms especially during low demanded periods and advertise own website for direct bookings to control commissions.

How It Works: Therefore, leverage on OTAs to increase exposure and get a hold of bookings from a large number of people. But assure the guests to make the booking on the website to avail some additional benefits or best price or free upgrade or some service.

Tip: These changes can be tracked with regards to the commission fees that are charged by the OTA partners and the amount of revenue thus made, to check how effective the marketing strategies for these partners are.

7. Apply Data and Analytics for Business Forecasting

Yield management extracts high revenues from its customers and highly depends on identifying and processing data. This article shows that by identifying potential stay patterns and thinking through past and current booking behaviors, conditions inside and outside the hotel, hotels are now able to predict demand, and therefore set pricing for optimal revenue accurately.

How It Works: Some of these recommendations include employing an enhanced revenue management software that takes into account the various features like occupancy level, average daily rate or ADR and revenue per available room or RevPar. Rate performance using certain benchmarks and then forecast the sales for the future considering trends and impacts of external factors such as festivals, public holidays and changes in the macro environment.

Tip: Always taking your time to revisit and update the forecasts whenever you get new information will make you relevant with the market changes.

How iNPLASS Can Boost Your Hotel’s Revenues?

Want to know about fine yield management practices? At iNPLASS you can use value-added services that would be based on artificial intelligence, for example, dynamic room rates, demand for them at a particular period of time or long-term, and various indicators for increasing the efficiency of your operations. Please get in touch with us to find out how our solution can help your hotel deliver positive business results.

Conclusion

Yield management is critical in hotel businesses because of its importance in enhancing the hotel’s income and receptiveness to a competitive and fluctuating economy. Through type of pricing theories, type of customers, the number of nights available, availability of more customers than rooms, and the use of statistics to forecast demand, hotels are able to maximize use of any space that is available. Not only do these yield management strategies work to generate more income, but they also serve to enhance guest satisfaction since supply and prices and services match guest needs and wants.