What Is Yield Management? 5 Strategies To Boost Your Revenue
No more static pricing
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No more static pricing 〰️
What is yield management? 5 strategies to boost your revenue
Yield management is a dynamic pricing strategy designed to produce the maximum revenue from your set inventory of rooms. As a property owner, you will strive to have the highest occupancy rate as possible as you know your inventory is perishable. (If a room isn’t sold, you can’t turn back the clock to try and resell it)
The goal with yield management is to manually manage your pricing and inventory to maximize your properties revenue.
For example, you may notice Thursdays and Fridays you are not receiving the number of bookings you would like or expect. As a part of your yield management strategy, you may manually lower your rates when the demand is lower. This can attract new bookers looking for a deal that otherwise wouldn’t book with your average, static price per night.
You can also do this in periods where there is high demand and raise your pricing. Something we recommend at Hostimize is mapping out all of the events that are happening in your local area throughout the year and then due to the increase of demand for stays, you can charge more during those periods.
Different examples of yield management strategies
Data analytics
Analyze the market conditions and use historical demand to better forecast when you will need to adapt your pricing or offering.
Competitor analysis
Tracking competitor rates will help you make better decisions. You can use their pricing as an anchor and then decide whether you want to undercut them or not. Be extra careful with this strategy as it can become a race to the bottom and you all end up devaluing what you have to offer.
Identify your target market
Once you have identified your target market and split it into segments, you can better understand each of their behaviors and buying habits. Your Booking.com bookers may be more inclined to book last minute, whereas your corporate stayers may book well in advance. Keep an eye out for patterns and adjust your pricing accordingly.
Manage booking channels
If you have multiple booking channels running alongside each other, you can actively manage discounted rate plans. If the demand is high, turn the discount offering off, but if the demand is low you can ramp up your offering.
Stay restrictions
Implementing things like minimum length of stay can be hit or miss. However, we have seen it be successful with several property owners. Only allowing people to book three nights or more can increase your occupancy for certain times of the year but can also push potential guests to book elsewhere if they are looking for a shorter stay.
The main benefits of yield management for property owners
Uncover more opportunities to drive bookings and revenue.
Monitor competitor rates to strategically position your pricing.
Take advantage of reporting and analytics. (understand booking patterns)
Increase value perception. (scarce inventory)
Segment your market. (better understand customers)
How to calculate yield management?
Yield management = Achieved revenue / Maximum potential revenue x100
If you have 4 bedrooms priced at £120.00 per night, your maximum potential revenue is £480.00.
If you have 2 bedrooms that have sold for £120.00 per night, your achieved revenue is £240.00.
Your yield percentage would then be £240.00 ÷ £480.00 x100 = 50%
Conclusion
We hope you have enjoyed today’s blog on yield management. We know it is very boring but it has become an essential part of the hospitality marketing game. If you need any help with optimizing your properties pricing, you can get in touch with our team! (there is a lot of great software in the market that can do all of this for you, so maybe shop around to see if there are any good fits for your business)