How to use yield rates to maximise your hotel’s revenue growth – part 2 of 2

  Posted in Revenue Management

By David Chestler, EVP, Global Enterprise Sales & Business Development, SiteMinder

Yield management is fast becoming a pivotal pricing strategy for today’s hotelier. Revenue managers and general managers of small hotel properties are today looking beyond ADR (Average Daily Rate) and RevPAR (Revenue Per Available Room) to other measures such as GOPPAR (Gross Operating Profit Per Available Room). Long gone are the days when it was just about room sales. Today, hoteliers need to consider packages, amenities and services including upgrades, dining and food & beverage as well as entertainment spend per guest.

In part 1 of this blog, we took a look at the goals of effective yield management, how it’s enabling small hotel properties to compete, and how a better understanding of your guest customers can ultimately help to manage your inventory.

In this final part, we will explore two other crucial tips to further maximising your revenue growth:

1. Forecast demand by customer segment

Hoteliers must strive to match their guests’ timings and service characteristics to their willingness to pay, to ensure they receive the best guest experience. The key is to use your data to understand your different customer segments and their sensitivity to pricing, and combine that information with seasonal demand. For example, business travellers tend to be less price-sensitive than leisure travellers.

Using your demand forecasts, you will have information on how to set your booking limits – that is, the number of rooms you wish to sell at a discounted price to leisure customers, and the number of rooms you wish to reserve for full-price business customers.

Understanding your property business mix is critical to better forecasts and more strategic pricing strategies. You can also use seasonality to help drive regional business. Australian tourists, for example, travel at different times of the year to businesses in the U.S., as their Summer is during our Winter and therefore can bolster your business when you would otherwise not be driving as many reservations or conversions during that season.

2. Increase your revenue based on demand

Seasonality, special events and high demand can allow hotel properties to alter their rates in order to increase revenue. Again, the idea isn’t to simply increase rates or occupancy but, rather, to analyse your different segments so you can attract the right customer at the right time. For example, a business traveller who normally books during the week will likely be indifferent about weekend or holiday discounts. However, conversely, price-sensitive leisure travellers may be lured by multi-night discounts and seasonal promotions.

As such, consider review pricing and marketing tactics for products such as:

  • Special rates on multi-night stays
  • More valuable rooms or upgrades for long-stay guests
  • Bundling, package and excursion deals (e.g. Valentine’s Day)
  • Special room rates for members of tour groups, conferences, and recurring airline or business customers.

Based on an analysis of your customer segmentation and booking trends, you can create different revenue options for rooms by incentivising your preferred target market with personalised promotions and discounts. Finding the right mix of room rates and incentives as part of an ongoing yield management strategy will, of course, involve doing your market research and testing your hypothesis against your desired metrics. Many marketers believe in A/B testing to constantly improve offers for target prospects and channels.

In today’s transparent pricing landscape, hotels must embrace yield management as a core driver of profitability. By making use of ongoing rate yielding and measuring your results, you can offer your guests the right mix of room types, prices and promotions that allow you to maximise your occupancy and your revenue.

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