Are you tired of hearing about this seemingly miraculous method without being able to determine if it's worth spending time on? You are certainly wondering if your activity really justifies the use of yield management? Finally, you understand the theory well, but would like to know more concretely what it brings to your daily life?
In this article I will detail with you the ambition of yield management and the 5 concrete benefits for your activity . In other words, how in your daily life will revenue management help you achieve the objective of maximizing your turnover.
Ultimate ambition of Yield Management: maximize your turnover
I usually talk about revenue management on this blog. So will you tell me what is the difference between yield management and revenue management? The difference is extremely simple: there is none . The term yield management is the one used initially. It gradually transformed into revenue management.
The ambition of revenue management methods is to maximize turnover . Note the use of the word “maximize” and not “increase”. It's subtle but it's important. It is in fact not possible to increase your turnover infinitely. The objective is therefore to generate the maximum possible turnover with the activity you have, in the market you have.
So what are the levers used to achieve this ambition?
- the sale price ,
- inventory optimization ( i.e. adjusting the availability of the service: setting conditions for reserving rooms)
- and additional income
It is thanks to these 3 elements that you obtain immediate benefits in your activity. And this, both in the exercise of your functions, and for your customer during the act of purchase.
Benefit 1 – Determine the ideal selling price
First of all, revenue management methods help you determine the best selling price . It is not unique by the way. Each type of period and each type of customer at its ideal selling price. Analysis methods allow you to find the right price for the right customer at the right time. It is also not excluded to have a touch of daring to test the price up to which your client is prepared to go.
Benefit for you
You are more sure of your selling price , you clearly know why it is at this level and what competitors are offering for the same price: you are therefore more comfortable selling it
Benefit for your customer
The price is not the same depending on the period, so for the most price-sensitive customers it is the opportunity to offer your service at a more affordable price during the least demanded periods.
Benefit 2 – Maximize the occupancy of your hotel/apartment
By launching a revenue management dynamic, you stop accepting first-come, first-served reservations and place constraints on reservations during peak periods . For example, you can request a minimum length of stay during peak periods. With revenue management you know precisely if constraints must be applied and how .
Benefit for you
The filling of your hotel or apartment is optimal . Please note this does not mean that it is always 100%. Sometimes it's better to fill a little less at a better price.
Benefit for your customer
The rarest availability remains reservable for longer if he is prepared to pay the price.
Example: if you accept all lengths of stay, it is possible that during certain periods, long stays are no longer possible (because you have reservations for one night which prevent you from reserving for the week). With a minimum length of stay requested, you protect longer availability (7 days for example).
Benefit 3 – Determine negotiated prices
Revenue management methods help you make the decision to grant negotiated prices (and at what level). This may concern prizes intended for companies or prizes intended for groups. The method aims to calculate the gain obtained by the company or group versus what you would have achieved in “classic” sales . The objective is to evaluate the resulting gain or loss of turnover.
Benefit for you
In the same way as for the public sale price, you are more sure of your negotiated price: you are therefore more comfortable selling it . Furthermore, you also have the guarantee that your decision does not put your turnover performance at risk.
Benefit for your customer
The customer has all the cards in his hands to make his decision : either he accepts a high price during a strong period or he shifts his demand during a weak period to get a lower price.
Benefit 4: Optimize the distribution and use of different distribution channels
By distribution channels we mean all the sales means available to you.
Here are some examples:
- your own website
- your reception/your direct telephone
- all sales sites on the market (booking.com, airbnb, etc.)
- a commercial entity that works for you
- etc
In revenue management, the optimization of distribution channels is one of the important subjects . We answer the following questions: what price level should be set according to the different sales channels? Should it be the same everywhere? What is the return on investment for each channel?
The objective is also to be an actor in its distribution and not to suffer from exclusively commissioned distribution (like booking.com for example). It is therefore imperative that you take care of and develop all sales made directly from your services or on your own site .
Benefit for you
Your distribution strategy is more profitable and you can encourage customers to go directly through you in a timely manner.
Benefit for your customer
Customers have a choice on how to book your service and will benefit from the advantages of booking directly with you rather than booking on Booking or Airbnb.
Benefit 5: Determine promotions and marketing & communication needs
Another benefit is to have a clearer vision of the periods requiring marketing support in communication or promotions. Establishing the promotional strategy is part of revenue management. We are therefore working on the following points:
- when to do it?
- what price level should you go to?
- for which customers should a promotion be launched?
Benefit for you
Your promotional strategy is no longer reactive (I'm empty, so I'm doing promotions), but it is worked on in advance . This allows it to be very efficient . Furthermore, you also gain peace of mind, because your visibility of your activity improves. No more last minute stress for rooms remaining empty!
Benefit for your customer
An anticipated promotional strategy builds the trust your loyal customers have in you. Furthermore, it also allows you to thank or boost sales of the types of customers you want to boost. For example, make promotions specifically for new customers, loyal customers or professional customers, etc.
What to remember
In summary, launching or improving your revenue management/pricing strategy brings benefits:
- so much for you: in the exercise of your duties
- only for your customer: in their act of purchase
All in the service of a better overall attractiveness of your hotel/apartment.
If you would like to learn more about revenue management, do not hesitate to visit the site map to consult other articles and increase your turnover.