Introduction of Yield Management Elements of yield management Application of Yield Revenue Management

1. Gurunanak institute of hotel management
NAME –ARITRYA DAS
UNIVERSITY ROLL. No- 191112019119
COURSEANDSEMESTER-B.SCH&HAAND 3RDSEM
SUBJECT-FRONT OFFICE PRACTICAL
PAPER CODE- BHM- 593
EMAIL.ID – BADDSHA244@GMAIL.COM
MOBILE. No- 9832913381

2. INTRODUCTION
 Yieldmanagement is the techniquewhich is used to increase the
room revenue. In hotel industry yield management is also
sometimes calledrevenue management. Hotel's daily
performance like most of other industriesis evaluatedon the
basis of either occupancy percentage or average daily revenue.
The tariffmay be reduced or discount percentage may be
increased to increase the occupancy but it may not increase the
revenue in the same proportion. Some hotels prefer to keep the
tarifflow in order to increase the occupancy percentage and on
the contrary some hotels prefer to increase the tariffin spite of
low occupancy percentage .The most appropriateroom tariff will
be which gets the maximum possible revenue and maximum
possible occupancy percentage and this is calledyield
management.

3. Concept of yield management
 Airlines were the first industry where the yield management concept used. In
face any industry which deals in perishable product the yield management
concept is very useful. Like airlines, this concept is more popular in hotels,
restaurants, car rental, bus rental, cruises, railways etc.Yield management is
based on supply and demand formula.As and when the demand increases the
supply the price increases and on the contrary if demand is less then the supply
then the price decreases . During off season low price booking is accepted but
during peak season only high price booking are taken. In peak season even up
selling is recommended.
 The demand forecast assists front office manager whether the price should be
lowered or increased, and whether a reservation request should be accepted or
refused in order to maximize the revenue. Hotel's manager biggest problem is
that neither they can increases the supply of rooms in case of more demand nor
they can store it and sell on the following days in case of rooms left unsold on
particular day.Yield management control forecast information in three ways to
maximize revenue and these are:
1. Capacity management
2. Discount allocation
3. Duration control

4.  Capacity Management: Cancellation at last moment and no-show scan never
be eliminated. Capacity management means over booking. With experience front
office decides that how much over booking should be done so that cent percent or
more than cent percent booking may be achieved. In case of over booking, it is
always safe to request the similar hotels near by to hold few rooms in case of
emergency and overflow of guests holding guaranteed/confirmed booking can be
diverted to the other hotels and hotel can pay for their cab fare and even
difference in room tariff. Capacity management also include determining how
many walk-ins should be accepted on the day of arrival based on expected
cancellations, no-shows, late arrival and early morning departure.
 Discount Allocation: Discounting means selling rooms at a price lower then
rack rates. Room is a perishable product. It is better to sell it at discount then to
keep it vacant. Moreover a room sale will also increase the food sale. If possible
hotel can offer high value rooms at the single or double room rack rate instead of
giving discount on single or double room.
 Duration Control: in case on certain date say 10thOctober only a few rooms are
available but on the dates before say 7th, 8th, 9th and after that date say 11th,
12th, 13th rooms are available then hotel may refuse a booking request for 10th
October only. Hotel will prefer to sell rooms for 10th October if there is a demand
for some other days as well either before 10th or after 10th October. This will help
hotel in optimizing room revenue. But if all the dated from 7th October to
12thOctober most of the rooms are sold and there is a reservation request for 10th
October only then hotel may accept it as other dates areal ready booked.

5. SO WHAT DOES THAT DEFINITION
ACTUALLY MEAN?
Selling the right product
*correct brand, room type, and meeting space
To the right customer
*transient or group/ business or pleasure
At the right time
*the booking window of how far out guests book
For the right price
*properly position rates for each segment

6. 4KEY TOOLS FOR THE REVENUE MANAGEMENT
DEPARTMET-
Revenuemanagers may draw on a wide range of technological tools to help them do a
good job. Each tool automates tasks which would otherwise be impossible or take too
long.These revenue tools make the work of revenue managers more efficient,
allowing them to dedicate their time to developing and implementing strategies.
The 4 essential tools for a revenue manager are:
 PMS
The Property Management System (PMS)is a key tool for the success of a hotel
establishment. Having a tool which makes the workflow easier in Reception will help
to create the perfect guest experience. With the abundance of new technologies, it is
important to take the time to select the PMS which is most suited to our needs and
which offers the best connections to other systems.
 Bookingengine
Anotherof the most important technological tools for a hotel is the booking engine,
which manages the direct point of sale. As you know, booking engines facilitate
international reservations, not only because they process payments online without
human intervention, but also because they allow international currencyconversions
and translation. It is essential that you have a booking engine which can be
integrated with the PMSand the channel manager, so that availability is
automatically updated and unavailable rooms are not sold.Your booking engine can
also be connected to the pricing tool so that prices on OTAsas well as on the hotel
website itself can be monitored.

7.  Channel manager
Thechannel manager is necessary to efficiently manageyour inventory on all reservation channels from a
single monitoring point. Insteadof signing into various reservation portals to manageyour online prices and
inventory, you can do everything from a single system which updates in real time.
Some channel managers use thegroup edinventory model, where you can allow all youronline inventory to
be soldat once without theriskof overbooking, as they will ensure that all reservation sites are updatedas
soon as a room is reserved. It is crucial to have a channel manager which can be integrated with thePMS, as
it will also incorporate yourdirect channel, meaning that when a guest reserves by telephone andthe
reservation is created in thePMS, the inventory will automatically be up dated on all online reservation
channels.
TheYield planet Channel Manager allows online distribution to be streamlined with abalanced combination
of channels.With over 400OTA,GDSandCRS already connected, you can adjust thesettings to createthe
perfect distribution portfolio. At the sametime, it allows you to preset up to 20 charts with room prices and
individual price plans and assign them to thelevels of the grid. Theallotment function monitors
reservations and cancellations to adjust theinventory andtransmit theupdatedavailability to all channels.
 Rate shopper
One of the key functions of a revenue menageries to pay attention to theprices of competitors.Therate
shopperdoes precisely this: it compares prices in real time, through your different reservation channels and
by room type.
Using theYield planet Price Shopper, you can obtain the prices of yourcompetitors in real time, as well as
their most recent available prices from all sources simultaneously.Click on theselected day and obtain
instant results forthat specific date.
A goodselection of technological tools for revenue management willnot only increase therevenues of your
establishment, but willalso enhance the efficacy of your sales and marketing efforts. At thepresent time,
when competition in thesector is rising steadily and customers arefar moredemanding, more intelligent
revenue management strategies must beimplementedin order to guarantee success.

8. ELEMENTS OF HOTEL
YIELD MANAGEMENT-
The following element must be included in the
development of a successful revenue or hotel
yield management strategy:
1. Group room sales
2. Transient or FIT room sales
3. Food and beverage activity
4. Local and area-wide activities
5. Special events

9. 1.GROUP ROOM SALES AND ITS EFFECT
ON HOTEL YIELD-
Group sales form the majority of the room revenue is very important for hotel yield. It is common for
the hotels to receive reservations for group sales from three months to two years in advance of
arrival. Therefore understanding group booking trends and requirements is very necessary for
the success of revenue management. To understand the impact of group sales on overall room
revenue, the hotel should collect as much group profile information as possible, including:
 Group booking data - Groups tend to block 5-10%percent more rooms than they are likely to
need. If a group has a previous business profile, management can often adjust the block on the
basis of group's booking history. The hotel's deletion of unnecessary group rooms from a group
block is called the 'wash factor? However management must be careful in estimating how many
rooms to be 'washed' from the block. If a group block is reduced by too many rooms, the hotel
may find itself overbooked and unable to accommodate all the members of the group and it will
effect hotel yield badly.
 Group booking pace -The rate at which group business is being booked.
 Anticipated group business- Many national ,regional and state associations as well as some
corporations, have policies regarding the locations of annual meetings.
 Group booking lead time - A measurement of how far in advance group bookings are made.
 Displacement of transient business - Displacements the acceptance of group bookings instead
of transient guests. Since transient guests or FITs pay higher room rates than group business, the
reservations should consult its forecast staff whether or not to accept group business for better
hotel yield.

10. 2.TRANSIENT OR FIT ROOM SALES
AND ITS EFFECT ON YIELD-
3.FOOD AND BEVERAGE
ACTIVITY AND HOTELYIELD-
Transient roomsare the roomssold to free
individual travelers.Transient businessis
usually booked closer to the date of arrival
than group business maybe only one to
three weeks before arrival.In order to
maximize room revenues,front office
managersmay
 The booking pace and lead time should be
tracked for highest occupancy rate.Classify
roomson the basis of their location ,
desirability or size,and charge more for
better rooms.
 Hotels may offer deluxe roomsat standard
rates to attract guests especially when
demand islowto scale hotel yield.
 Discounts reduce the amount of business
lost because of rate resistance and allowthe
hotelsto sell roomsthat would otherwise
remain vacant.Discountscan be offered to
corporate guests, government travelers,
senior citizens,military and airline personnel
etc.
 Controlling discountsalso isvery important
for generating the highest revenue and hotel
yield.
 While catering functions are
considered food and beverage
revenue generators, they can
have an effect on room revenue.
For example, if a banquet with
no guest room requirements is
occupying the hotel's ball room,
a group needing 50 guestrooms
and a ballroom may have to be
turned away.Therefore a group
needing both catering and
guestrooms will be more
profitable. Hence
communication and
coordination between
departments is necessary to
maximize revenue from all
revenue centers in the hotel.

11. 4.LOCALANDAREA-WIDE
ACTIVITIES AND HOTELYIELD-
5.SPECIAL EVENTAND HOTEL
YIELD-
 Local and area wide activities
like conventions, meetings
etc, have a great effect on the
revenue management
strategies of the hotel. The
front office manager should
be aware of the activities and
the demand for guestrooms
created by them in the area.
The room rates should be
offered according to the
demand to take full
advantage of the opportunity.
 Special events such as
concerts, festivals and
sports events held in or
near the hotel are also very
important for the hotels
yield. The front office
manager should be able to
take advantage of these
events by controlling
discounts.

12. APPLICATION OF
YIELD(REVENUE) MANAGEMENT-
 Abstract In this paper westudy optimalstrategies for renting hotel rooms when there is a stochasticand
dynamic arrival of customers from different market segments.Weformulatetheproblem as a stochastic
and dynamicprogramming model and characterize theoptimal policies as functions of thecapacity and
thetime left untiltheend of theplanning horizon. Weconsider three features that enrich theproblem
:wemake noassumptions concerning theparticular order between thearrivals of different classes of
customers; weallow for multiple types of rooms and downgrading; and weconsider requests for
multiplenights.We also consider implementations of theoptimal policy. Theproperties we derive for
theoptimal solution significantly reduce thecomputationaleffort needed to solvethe problem, yet in
themultiple product and/or multiple night case this is often not enough.Therefore, heuristics, basedon
theproperties of the optimalsolutions, are developed to find "good" solutions for thegeneral problem.
We also derive upper bounds which are useful when evaluating the performance of theheuristics.
Computationalexperiments show asatisfactory performance of theheuristics in a variety of scenarios
using real datafrom amedium size hotel.
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