Revenue Management

15.04.2016

Matthias Matthias Managing Director

Yield Management - Is this price dumping?

As we have noted in many conversations with hoteliers, the concepts of yield management and revenue management are often associated with price dumping. In this post I would like to devote myself to this topic and create a little clarity.

Yield Management

Origin and meaning of the terms

Yield management and revenue management are often used synonymously, whereby yield management is more specifically related to pricing and revenue management rather describes the entire strategy behind it. In this article you can learn more about the difference between yield and revenue management.

The origins of the concepts and the concept behind this are found in American airlines in the 1980s. From the perspective of a company, such as an airline, but also a hotel or a hotel chain, it is therefore a question of managing or maximizing sales.

Limited availabilities

In this case, flights and hotel overnight stays are of particular interest as they have and important common feature: There are high fixed costs, which are incurred whether a seat or a room is booked or not and the number of places and rooms are limited. This provides excellent opportunities for revenue management in this area.

Pricing

This does not mean that the prices are set extremely low to be cheaper than the competition and to attract the customers with this price leadership. This does not mean that the prices are high. In fact, it is about asking every customer the price he is willing to pay, because in this way, revenue is maximized on the hotel side. With revenue management, tourism records without profit increases are now a thing of the past.

In practice, this means that the room rate is directly dependent on the demand. This is now the best way to predict and this is the task of the Revenue Manager of the Revenue Management Software.

Overall, the average prices and the turnover of hotels which work with revenue management are increasing.

 

Interested? Request your free demo now.