Yield management.pptx

Front office notes

1. Yield management AKHIL DESHPANDE Akhil -Deshpande/5sem/September2020 1

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. Akhil -Deshpande/5sem/September2020 2

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 Akhil -Deshpande/5sem/September2020 3

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. Akhil -Deshpande/5sem/September2020 4

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. Akhil -Deshpande/5sem/September2020 5

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 agent rates. Akhil -Deshpande/5sem/September2020 6

7. Benefits or Importance of Yield Management Improved forecasting Improved seasonal pricing Identification of new market segments Identification of market segment demands Enhanced coordination between the front office and sales divisions Determination of discounting activity Improved development of short-term and long-term business plans Establishment of a value based rate structure. Savings in labour costs and other operating expenses Planned responses to guest inquiries or requests regarding reservations. Akhil -Deshpande/5sem/September2020 7

8. Thank you AKHIL DESHPANDE Akhil -Deshpande/5sem/September2020 8