What is Yield Management ? - Hotel and Business
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Yield management is the process of allocating capacity to maximize revenue. It originated in the airline industry due to deregulation. It includes variable pricing strategies, inventory strategies, management control, and multidisciplinary handling strategies. The key conditions for yield management are a fixed resource, perishable inventory, and customers willing to pay different prices. It is a branch of revenue management, which aligns prices and availability with customer segments. Hotels use similar strategies to calculate rates and inventory to maximize returns. The pros are flexible pricing and increased revenue, while the cons can be unfairness and opportunistic behavior from customers.
What is Yield Management ? - Hotel and Business
- 1. YIELD MANAGEMENT Presented by: Buo, Kimberly Carl, Charlene Castilleos, Carl Jerald Chuakunhong, Jesmine Chung, Railey Coronado, Samantha Presented to Prof. Chuchi Alcoseba RDIMCON / HIB21 / BS-IHM DLS-CSB
- 2. What isYield Management ? ■ The process of allocating the right type of capacity to the right kind of customer at the right price and at the right time so as to maximize revenue or yield.
- 3. What is aYield? ■ Yield is the Income minus the Expenses and also called the “Profit Margin”
- 4. Where didYield Management originated? ■ “Deregulation” is generally regarded as the “catalyst” for yield management in the airline industry, to overlook the role of global distribution systems. In short, it originated from the Airline Industry.
- 5. What doYield Management includes ? Mainly: ■ Variable Pricing Strategies ■ Inventory Strategies ■ Several aspects of ManagementControl ■ Multidisciplinary Handling Strategies
- 6. 1.Variable Pricing Strategies ■ Based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, time- limited resource
- 7. 2. Inventory Strategies ■ Inventory-focused branch of ”Revenue Management” which involves strategic control of inventory to sell it to the right customer at the right time for the right price.
- 8. 3. Several aspects of Management Control ■ Including Rate Management, Revenue Streams Management, and Distribution Channel Management.
- 9. 4. Multidisciplinary Aspects ■ It blends elements of marketing, operations, and financial management into a highly successful new approach.
- 10. What are the conditions forYield Management ? There are 3 Essential conditions forYield Management to be applicable: 1.)That there is a fixed amount of resources available for sale. 2.)That the resources sold are perishable (there is a time limit to selling the resources, after which they cease to be of value). 3.)That different customers are willing to pay a different price for using the same amount of resources.
- 11. What is the connection ofYield Management to Revenue Management? ■ As a stated before,Yield Management is an Inventory-Focused branch of Revenue Management
- 12. What is Revenue Management? ■ The essence of this discipline is in understanding customers' perception of product value and accurately aligning product prices, placement and availability with each customer segment.
- 13. Essence ofYield Mangement in the Hotel Industry ■ Hotels use this system in largely the same way, to calculate the rates, rooms and restrictions on sales in order to best maximize their return. ■ Yield management teams in the hotel industry have evolved tremendously over the last 10 years and in this global economy selling rooms and services at the right price, at the right time, to the right people.
- 14. PROs ofYield Management ■ Wide prices options – gives the feeling to buy or choose cheaper services for customers ■ Relevant solutions for companies to maximize revenue ■ Increases competitive advantages through utilization of different price factors ■ Improves sales through price optimization
- 15. CONs ofYield Management ■ Sense of unfairness for majority of customers who likes low constant prices within different periods of time ■ Can create an opportunistic behavior on the part of customers ■ Perception problems from discounts to service quality
- 16. Conclusion ■ Yield Management is a key marketing or pricing tool for profit maximization in some industries but in some cases, it can also alienate customers. Nevertheless, the problem of high fixed costs and inventory makes filling of aircraft seats and hotel rooms so compelling thatYield Mangement is essential.
- 17. THANKYOU !