Managing Rooms and Revenue: Challenges of Yield Management in Hotels

You might be thinking, 'Why does everybody talk about yield management and their challenges?'

Let me tell you, in this hospitality industry, managing rooms and Revenue isn’t easy because each empty room shows lost Revenue that can’t be recovered in the future. For example, as we know, hotel rooms are perishable goods which we can’t sell the other day; like, if you can’t sell a room for a night and it goes empty, it means you lost that opportunity to sell it forever. It will be Revenue loss for a day.

So, to overcome these challenges, hotels rely on the principle of yield management, in other words, Revenue Management.  Which is a strategy to focus on selling the right room to the right travellers at the right time at the right price. When this strategy helps to enhance profit and increase occupancy rates. But it also creates various significant challenges for hotels to manage rooms and Revenue effectively.

Let’s understand the several challenges that hotels face.

• Uncertainty in demand forecasting

Predicting demand is completely based on various factors, like local events, economical conditions, politics, seasons or unexpected circumstances. For instance, sudden changes in weather, like landslides happening in the hilly area, can reduce the bookings overnight. Due to these uncertainties, weather forecasting errors can occur for poor pricing decisions. So, always use reliable forecasting techniques and tools that can integrate with your past booking data, current booking data and market trends. In time, you need to update and forecast trends to accurately predict.

• Overbookings

Showing overbooking is an essential strategy to cover no-shows or cancellations. But it needs proper management to avoid and overcome operational issues and guest dissatisfaction. Suppose your hotels are full and you are getting lots of bookings and guests also come; then you have to shift your guests somewhere else. That could be the reason for dissatisfaction and added costs.

So, to overcome this, analyse your past cancellation data to set the best overbooking criteria. But, for that, you need to maintain good relationships with neighbourhood hotels for alternative options.

• Increasing occupancy by optimising room rates

Basically, yield management seeks to increase the hotels' Revenue by controlling and adjusting room availability and room rates. For example, if you have kept your room prices high and others are lower than yours, then it could reduce your occupancy. Or else, if you keep low prices for your room, then you may maximise occupancy, but your Revenue will be limited. However, maintaining a balance between occupancy and Revenue can be challenging. So, you need to implement dynamic pricing strategies that can adjust room rates in real-time; for that, you need Precium RMS.

• Rate expectations with guest satisfaction

If changing the rate frequently, then it can lead to guests' dissatisfaction, especially when they find that other hotels are offering rates better than yours.

This dissatisfaction can be the reason for negative reviews and affect your brand loyalty. So, you need to offer them standard rates and service charges for valuable and high-paying guests.

Conclusions

Yield management is a strategy to increase the Revenue and focus on long-term success.

But it faces challenges like demand forecasting, market trends, pricing, guest satisfaction and data analysis that can impede yield management, but these can be managed with the right strategies.

These challenges can be mitigated through Precium Real-time Competitors Rate Shopping Tool to plan well and implement the strategy that can drive profitability and operational performance.