The document discusses yield management, a strategy primarily introduced by the airline industry in the 1970s, to maximize revenue through real-time forecasting and effective pricing. It highlights its application across various industries such as hotels, car rentals, and cruises, and outlines essential components, benefits, and risks associated with yield management. Key points include optimizing inventory, predicting consumer behavior, and the importance of communication in decision-making processes.

1. Yield Management
Amit Vohra

2. Scope
● Origin
● What is Yield Management
● What is yield?
● Goal of Yield Management
● Industries that use yield
management
● Conditions for application of Yield
Management
● Components of Yield Management
● Points to note for Hotel Industry
● Importance of Yield Management
● Steps for Yield Management
● Benefits of Yield Management
● Risks of using Yield Management

3. Origin of Yield Management
● Concept introduced by the airline industry in 1970’s
● Sold perishable seats at rack rates
● Adopted a technique based on Demand & Supply
● Demand exceeded supply = increase the rate and supply exceeds demand = demand the rate
● Demand exceeded supply = increase the rate and supply exceeds demand = demand the rate
● Yield management was referred as revenue per available seat per mile.

4. What is Yield Management?
● It is a strategy that enables the service industry to obtain revenue through operations.
● It is a method based on real time forecasting and on the demand for a product or service offered.
● It is a plan that provides the right service at the right time to the right customers at the right place.

5. WHAT IS YIELD?
● The final product after processing
● Revenue generated per statistical unit
● Yield = Output = revenue
● Therefore, yield management = revenue management
● Yield is the total output and depends upon facts

6. Goal of Yield Management
.
The main goal
of yield
management
is to
maximise
revenue

7. Industries that use Yield Management Systems
● Airlines
● Hotels
● Car Rental Agencies
● Cruise Lines
● Railroad
● Television Broadcast
● Telecommunications
● Restaurants
● Golf Courses

8. Conditions for application of Yield Management Systems
Fixed amount of resources for sale
● Airline seats, hotel rooms
Resources sold are perishable
● Tomorrow, hotels sells tomorrows room
Differential pricing
● Customers willing to pay different price for using the same resources.

9. Why companies use yield management systems
● "Accurately assess future consumer behavior under dynamically changing market conditions."
● "Determine the most effective way to price and allocate inventory to reach every future consumer, each
and every day, making real-time adjustments as market conditions change, with the consumer in real-
time."
● "Communicate this information instantaneously to distribution and sale outlets which deal with the
consumer in real-time."
● "Serve as a decision-support resource for marketing and operational functions, including but not
limited to: pricing, scheduling, product development, advertising, sales, distribution, human resource
utilization and capacity planning."

10. Components of Yield Management
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11. Points to be considered for Hotel Industry
Predict consumer behaviour
● Length of stay
● Buying capacity
Optimize the prize and inventory available to each customer segment
● Discounts
● Packages
● Apply rack rates
Focus on revenue maximization than on cost minimization
● Do not cut on facilities and amenities
● Effect quality and brand name
Marginal cost which is involved in cleaning and supplies will be incurred only if the room is sold.
● Loss to hotels operating cost

12. Importance of Yield Management
● Improved forecasting
● Improved seasonal pricing and inventory management
● Identification of new market segments
● Identification of new market segment demands
● Increased coordination between front office and sales
● Determination of discounting activity
● Improved short term and long-term planning
● Increased business and profits

13. Steps for Yield Management
Forecasting
Prediction of future
business as per reservation
data.
Tools for forecasting
- Thorough product
knowledge
- Profile of the market
segment
- Special events in the city
- Percentage of no-shows,
cancellations
- New competitors in the
vicinity of the hotel
Systems &
Procedures
Although the individual task
of yield management can be
performed manually, the
most efficient means of
handling data and
generating yield statistics is
through yield management
software.
Strategies & Tactics
Apply strategies as per high
and low demand and
supply.
Apply business tactics to
increase revenue like
offering
- Discounts
- Packages
- Commissions
Feedback
To access effectiveness of
the decisions taken
To access efficiency of the
strategies and business
tactics used
To access performance of
the hotel staff

14. Benefits of Yield Management for Hotels
Competitive
Pricing
Effective
segmentation
Understanding
Customer
expectation
Decrease
Errors

15. Risks in using Yield Management
● Loss of competitive focus
● Customer alienation
● Low morale among staff
● Incompatible incentive and reward system
● Lack of employee training
● Absence of centralized reservation

16. Questions?

17. Thank You!