Yield management aims to maximize profit from hotel room sales and services. It originated in the airline industry where different passengers pay different fares. Yield management has been applied successfully in industries with perishable inventory like hotels. It uses demand forecasting to determine if room prices should increase or decrease and whether reservations should be accepted or rejected to maximize revenue. The key benefits of yield management include improved forecasting, pricing, identification of market segments, and coordination between hotel departments to improve profits.

1. YIELD MANAGEMENT AKHIL DESHPANDE
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2. YIELD MANAGEMENT IN FRONT
OFFICE
What is Yield Management in Front Office ?
The goal of yield management is two fold: to maximize profit for
guest room sales and to maximize profit for hotel services. These
goals are important for future hoteliers to understand, because if
they set out only to maximize room sales, the “most profitable guest”
may not stay in the guest room. This is the difference between airline
yield management and hotel yield management.
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3. ELEMENTS OF YIELD MANAGEMENT IN
FRONT OFFICE
The elements of yield management in front office are :
Yield is the percentage of income that could be secured if 100
percent of available rooms were sold at their full rack rate.
Revenue realized is the actual amount of room revenue earned
(number of rooms sold - actual rate).
Revenue potential is the room revenue that could be received if all the
rooms were sold at the rack rate. The formula for determining yield is
as follows:
Yield = revenue realized / revenue potential
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4. CONCEPT OF YIELD MANAGEMENT
The concept of yield management originated in the airline
industry. Most travellers know that passengers on the same
flight often pay different fares. Super-saver discounts, three-
day advance-purchase plans, stay-over-Saturday-night
packages, and so forth have become the norm for airline
pricing. What is not as widely known is the potential application
of yield management to other service industries. Yield
management has proven successful in the lodging car rental,
cruise line, railroad, and touring industries – basically, in
situations where reservations are taken for a perishable
commodity. The key to successful implementation appears to
be an ability to monitor reservations and to develop reliable
forecasts.
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5. CONCEPT OF YIELD MANAGEMENT
Yield management is based on supply and demand. Prices tend
to rise when demand exceeds supply; prices tend to fall when
supply exceeds demand. Pricing is the key to profitability. To
increase revenue, the hospitality industry is attempting to
develop new forecasting techniques that will enable it to
respond to changes in supply and demand with optimal room
rates. The hospitality industry’s focus is shifting from high –
volume bookings to high – profit bookings. By increasing
bookings on low – demand days and by selling rooms at higher
prices on high – demand days, the industry improves its
profitability. In general, room rates should be higher when
demand exceeds supply. They should be lower (in order to
increase occupancy) when supply exceeds demand.
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6. APPLICATION OF YIELD MANAGEMENT
IN HOSPITALITY SECTOR
In the hospitality industry, yield management –
sometimes called revenue management – is a set
demand – forecasting techniques used to determine
whether prices should be raised or lowered and
whether a reservation request should be accepted or
rejected in order to maximize revenue. Hospitality
industry managers have successfully applied such
demand – forecasting strategies to room reservation
systems, management information system, room and
package pricing, rooms and revenue management,
seasonal rate determination, pre-theatre dinner
specials, and special, group, tour operator, and travel
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7. BENEFITS OR IMPORTANCE OF YIELD
MANAGEMENT
1. Improved forecasting
2. Improved seasonal pricing
3. Identification of new market segments
4. Identification of market segment demands
5. Enhanced coordination between the front office and sales divisions
6. Determination of discounting activity
7. Improved development of short-term and long-term business plans
8. Establishment of a value based rate structure.
9. Savings in labour costs and other operating expenses
10. Planned responses to guest inquiries or requests regarding reservations.
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8. THANK YOU AKHIL DESHPANDE
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