August 23, 2023
Managing every room, setting the right price for them, and evaluating the revenue earned from each one is a daunting task. Yet, these tasks are vital for optimizing revenue in the hospitality industry.
Yield management can help with this.
We'll examine this tactic, discuss why it's crucial for hotels, and explore how hotel management software can optimize your rates, revenue, and yield management techniques.
What Hotel Yield Management Is and Isn’t
Due to the restricted number of rooms available in your hotel, optimizing the revenue generated from each room is critical. That’s why it’s important to have tools to refine your pricing strategy to earn you the most revenue possible.
Yield management is a dynamic pricing technique that aims to offer prospective visitors the right price at the right moment to create the best possible balance between your rates and occupancy.
This approach focuses on forecasting supply and demand to generate the most profit per room and provide a great booking experience through fair, competitive pricing. To thrive in the hospitality industry, it’s essential to have a great yield management strategy to maximize your return on investment (ROI) and offer a seamless booking experience.
You can calculate your yield management by dividing achieved revenue by potential revenue and multiplying by 100.
Yield Management = Achieved revenue / maximum potential revenue x 100
With this data, you will be able to make more informed decisions that incorporate the best balance between your rates and occupancy.
Hotel Revenue Optimization Steps with Yield Management
Some initial steps you can take to improve your hotel revenue with yield management are:
- Understand your industry, competitors, and guests
- Utilize data to make decisions
- Use dynamic pricing tools with your hotel management software
Here’s how a hotel PMS can achieve these steps and offer many more benefits.
3 Hotel Yield Management Techniques
1. Acquire Actionable Data and Insights From Each Channel
It's important to know the revenue generated by each booking channel you use, including online travel agencies (OTAs). This helps you identify your most profitable channels so you can refine your pricing strategy.
Yield management strategies paired with business intelligence (BI) tools in your hotel property management system (PMS) can help you identify your revenue stream from each channel.BI reports may include channel performance summaries and real-time data to help you make real-time decisions.
With BI tools, your hotel will gain a competitive edge by assisting with optimizing pricing and marketing initiatives.
2. Understand Your Market and Guests
Recognizing the link between your hotel rates and your guests’ booking expectations can help you adjust your pricing to garner positive feedback and recurring business.
You can accomplish this by getting a more comprehensive understanding of your industry, competition, and guests.
Adapting to booking trends is vital to optimizing your yield management.
Some market segments will be willing to pay different rates at various periods. With BI tools within your hotel management system, you can determine which market groups reserve certain room types and when. This enables you to modify pricing strategies by analyzing current and historical data, trends, and seasonality shifts for optimal decision-making backed by data.
The industry of hotels is quite competitive. Consequently, it is essential to know what other businesses offer visitors.
You can obtain market information with BI, such as analyzing the room rates set by immediate rivals in your area and adjusting your rates to meet guests’ expectations.
3. Make Your Hotel “Dynamic”
The ability to adjust quickly can make or break a hotel’s yield management strategy.
A dynamic pricing tool with your hotel PMS allows you to raise rates when demand is high and drop prices when demand is low, enabling you to optimize your occupancy.
This includes changing prices and parameters based on the time of year (season) and the day of the week, during events, and adapting to changing traveler trends.
Setting parameters to adjust pricing to changes in occupancy, market conditions, and competitor activity gives your hotel a competitive edge while providing guests with fair, accurate prices.
Boosting Your Revenue with Hotel Yield Management Solutions
In this competitive industry, having the most optimized revenue and yield management at your fingertips is crucial.
Solonis provides a vast array of integrations, features, and supplemental resources to help you evolve your business operations and streamline management.
Download our free ebook, Operational Excellence in Hospitality: Using PMS to Work Smarter, and optimize your yield management today.