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Yield Management

This document discusses revenue management in the hotel industry. It begins with an overview of key metrics like occupancy percentage, average daily rate (ADR), and revenue per available room (RevPAR). It then provides a brief history of how revenue management originated in the airline industry and was adapted by hotels. The rest of the document outlines the goals, components, strategies, and challenges of revenue management, focusing on concepts like yield, forecasting room availability, block-out periods, and balancing maximizing rates versus occupancy.

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Bhaskar Roy
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2K views

Yield Management

This document discusses revenue management in the hotel industry. It begins with an overview of key metrics like occupancy percentage, average daily rate (ADR), and revenue per available room (RevPAR). It then provides a brief history of how revenue management originated in the airline industry and was adapted by hotels. The rest of the document outlines the goals, components, strategies, and challenges of revenue management, focusing on concepts like yield, forecasting room availability, block-out periods, and balancing maximizing rates versus occupancy.

Uploaded by

Bhaskar Roy
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Revenue Management

YIELD MANAGEMENT

ANAND BANDA
OBJECTIVES

 Review occupancy percentage and its


effectiveness
 Review average daily rate and its effectiveness
 Review RevPAR and its effectiveness
 Discuss history of revenue management
 Discuss use of revenue management
 Outline components of revenue management

YIELD MANAGEMENT
ANAND BANDA
History of Yield Management
 Airline industry’s use of yield Management

Deregulation of airlines in late 1970s “Take It or
Leave It”
 Certain periods, certain seats, certain flights…

 similarities of the airline industry and hotel


industry
• Volatile product
• Demand periods which places the producers in a
favorable position
 Indicate differences of the airline industry and
hotel industry in using yield management
• Hotel groups can spend large amounts of money
on-site for food and beverage
 Yield management: Yield management is
a process to achieve maximum room rates
and most profitable guest (profit from
guest spending on hotels food & beverage
outlets, health club, gift shop etc). It is a
part of successful administration of
reservations system, which helps
managers to produce a favorable income
statement.
Use of Yield Management
 Goals of yield management
 Maximize profit for guest room sales
 Maximize profit for hotel services
(food, beverage, and convention services)

 maxim Revenue Management Solutions (MaximRMS)


Definition of Occupancy Percentage
 Occupancy Percentage - reveals the success of a hotel’s
staff in attracting guests to a particular property
__Number of Rooms Sold x 100
Number of rooms available

 Double Occupancy Percentage – measure of a hotel staff’s


ability to attract more than one guest to a room; thus a higher
room rate and additional income
Number of Guests – Number of Rooms Sold x 100
Number of Rooms Sold
YIELD MANAGEMENT ANAND BANDA
Definition of Average Daily Rate
ADR
 Average Daily Rate (ADR) - A measure of
the hotel’s staff efforts in selling available room rates

Total Room Sales


Number of Rooms Sold

YIELD MANAGEMENT ANAND BANDA


Definition of RevPAR
 RevPAR – ability of a hotel to produce income and how many
dollars each room is producing.

Room Revenue
Number of Available Rooms
or
Hotel occupancy % x ADR

YIELD MANAGEMENT ANAND BANDA


Discussion Question
Utility of Occupancy percentage, ADR, and RevPAR?
• Used to project room revenues
• Demonstrate how room revenue is calculated
• Leads into Revenue Management
Components of Revenue Management
 Yield – the percentage of income that could be secured if 100% of
available rooms are sold at their full rack rate (highest room rate posted for
a room in a hotel)
 Revenue Realized
Number of Rooms Sold x Actual Rate
 Revenue Potential
Number of Rooms Available for Sale x Rack Rate
 Yield = Revenue Realized (# Rooms Sold x ADR)
Revenue Potential (# Rooms Available x Rack Rate)
Components of Revenue Management (cont’d.)

Yield = Revenue Realized (# Rooms Sold x ADR)


Revenue Potential (# Rooms Available x Rack Rate)

 Compare and contrast the concepts of yield


and occupancy percentage
Optimal Occupancy and
Optimal Rate
 Optimal occupancy- Achieving 100%
occupancy with room sales which will yield
the highest room rate.
 Optimal Rate - A room rate which
approaches the rack rate.
Strategies
components and strategies to employ when using
yield Management
 High demand for rooms = Maximize room
rates
 Low demand for rooms = Maximize room sales
 establish target numbers sales, manipulation of rates in
the electronic distribution channels as well as revenue
drivers within the organization (central reservations,
property-level reservations, and sales department, and
web site)
Forecasting
 Importance of daily accuracy in forecasting.
 Room availability forecast formulae:
 Once the relevant occupancy statistics have been
gathered the number of rooms available for sale on any
given date can be determined by the following formulae
 Total no of rooms
 - no of ooo rooms
 - no of stay overs
 - no of reservations
 - no of reservations x % of no show
 + no of under stays
 - no of over stays
 = ROOMS AVAILABLE FOR SALE
Block-Out Periods
 Block-out periods - Tagging certain dates
in a time period when rooms have to be
sold at a certain rate and/or certain
number of minimum room rental nights.
 It is also called as Blanket reservation
Management Challenges In Using
Revenue Management
 Alienation of Customers
 Minimum stay requirements
 Price gouge
THANK YOU

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