Within the hotel industry, revenue management and yield management are two of the most useful tools available to managers, allowing them to maximise the amount of money they make from guests. Although the two concepts are closely linked and share a lot of similarities, there are some important differences too. In this blog post, we explain the differences and compare the two strategies in greater detail.
Defining the Two Strategies
As a pricing strategy, yield management is concerned with generating the maximum possible revenue from a perishable inventory. Within the hotel industry, this means it is concerned with using data to ensure the right room is sold to the right customer, at the right time, for the highest possible price.
Effectively, it is about using price discrimination to optimise business results. Hotel guests are conditioned to paying different prices for the same product, depending on when they are staying at a hotel, how close to their check in date they made the booking, the level of demand for rooms and various external factors.
Revenue management is a related concept, although it has a wider focus. It is concerned with maximising revenue from hotel rooms in much the same way, but also deals with the cost of selling and money made from other aspects, like food and laundry services. It can, therefore, be described as being concerned with the big picture.
Why Are Yield and Revenue Management Important?
Both yield management and revenue management allow hotel owners and decision makers to take a measured, calculated approach to pricing. As a consequence, they are able to maximise the amount of revenue they generate from a limited, perishable inventory of hotel rooms.
The two strategies can be used in conjunction with one another, because they deal with slightly different things. Yield management’s focus on maximising revenue from hotel rooms alone is important, because it allows owners to optimise the very core of their business. However, the wider focus of revenue management compliments this, because it allows owners to maximise the overall revenue generated by their hotel.
Revenue Management KPI’s
Revenue management and yield management uses several KPI’s (Key Performance Indicators) to measure and identify areas of success and failure, as well as trends related to demand and customer behaviour. Take a look at our articles within the category “Revenue Management KPI’s” for information about the most used revenue management KPI’s.