For example, you can penalize last minute bookers with high prices and in exchange, set lower prices for those booking well in advance, and be sure to cover fixed costs. Hotels already offer discounted prices in low season, and higher prices during high season, but using this system of variable prices, you can adjust those prices according to when the client books. Perceived value is what consumers think the product is worth to them and in essence, they are willing to pay more for scarce goods.
This same concept applies to the hotel industry: consumers are willing to pay more during peak season because the perceived value is greater. Employing a variable pricing scheme, you can build this perceived value in the mind of the customers, incentivizing them to book further in advance, and thereby use marketing strategies to help boost this perceived value.
This kind of management program allows you to bring hotel management into the future by automating processes through technology. With a clear set of data from software integrations you can choose the best room rates for the time period based on clear data. Market segmentation is key to any business strategy, and an effective forecast can help capture the subtleties of this market segmentation.
Some of those nuances can be identified by booking trends and patterns as well as intentions to book and guest preferences. Throughout the year, hotels benefit from a variety of different guests from solo-travelers to family groups to corporate guests, among others. Using this strategy, hotels can identify the segments that they may be missing out on and adapt their marketing strategy accordingly. Furthermore, since different types of guests have different requirements, another advantage of this type of integration is the ability to set a variable price rate for different segments based on different factors.
For example, hotels can offer lower prices to leisure family groups who tend to book in advance, spend more, and tend to look for better amenities and services. On the other hand, you can offer higher prices to corporate guests who tend to book last minute, stay for a shorter period of time, and are less likely to compare prices.
One of the disadvantages is that since the decisions are driven by numbers and forecasts, there is no preferential treatment for regular customers. Because yield management is based on supply and demand, guests will pay higher prices during peak season. However, those guests paying prices through the roof will consider everything in terms of how much the room cost them. In order to properly forecast, hotels must gather data, organize it and coordinate with those in charge in order to implement it into a pricing system.
Since there are a great number of factors that influence demand, one of the disadvantages is that the revenue forecasts might not hold up well against the actual market trends and thereby jeopardize revenue. Nevertheless, it is important to note that yield management has a more narrow focus and is concerned only with the selling price and the volume of sales, so that the best possible revenue yield can be achieved.
The basic concept behind yield management is that certain fixed, time-limited resources, such as hotel rooms, can be sold for different prices, based on the time of year, the level of demand, the number of rooms already sold and a wide range of external factors besides. The same product i. Yield management strategies take a data-driven approach to ensuring pricing is adjusted in order to maximise business results. Adopting a yield management strategy allows hotel owners to maximise the amount of money they make from a finite number of hotel rooms, which need to be sold by specific times.
Through the use of past performance data and general industry trends, managers can anticipate demand and respond accordingly. Yield management also allows hospitality businesses to focus on optimising the pricing and selling strategy of their single most important resource — the rooms they have available. If there are dips in demand, you can use yield management practices to offer rooms at discounted rates and attract more guests.
That can lead to even more future bookings, as your customers would be thrilled to have paid less than usual to stay at your hotel. The same goes for high demand. Hence, you can boost revenue while helping customers make their desired bookings even during high demand. It helps you understand when to raise or lower your room prices to attract guests and meet their needs at the right time, thus increasing sales and yielding high revenues.
Group room sales can bring a lot of revenue to a hotel. To get the most out of them, your front office should collect data on group booking trends, lead time, and pace to forecast demand.
Transient or FIT rooms bring a higher revenue than group room bookings, as travelers typically book them closer to the arrival date. However, when demand is low, it can be wise to offer discounts.
Food and beverage outlets in a hotel can also impact room revenue. Even with a stable price or quantity being offered, your equilibrium point will eventually move to another level after some time.
If you are looking for the optimal price zone for your hotel, simply keep track of parameters such as the weather forecast, coming up bank holidays, competition prices, to pull up a list of relevant factors that will have an impact on it. With the Hotel Price Reporter solution for instance, you can keep track of a wide range of parameters, such as your competitive set prices, the weather forecast, coming up bank holidays as well as the local demand forecast for your city:.
If you want to learn more how to build a yield management strategy that works, we recommend you read our previous post about revenue management. That will give you lots of tips on the topic.
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