Concepts of the Yield Management: Room Management

Introduction

Revenue income in the hotel and accommodation business varies with seasons, hence the need for a company to adopt good management systems. Proper adoption of such strategies helps organisations to ensure that they remain in business during all seasons, hence business viability and sustainability.

Primarily this strategies aim to ensure organisations study well the consumer characteristics, which in turn will guide policy formulation and implementation as concerns pricing and booking. The common strategy or management scheme used by many organisations is yield management. This is a strategy adopted by most service firms to ensure they maintain their profits regardless of seasonal variations (Baker and Collier, 2010, p.1-2).

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Yield Management

Yield management is a revenue strategy adopted by organisations to ensure their businesses attain set goals or targets in terms of revenue collection. Failure by an organisation to meet its goals jeopardises the smooth running of an organisation, which can lead to business closure or disposing of some workers in order for it to work within budget.

The whole process involves determination of appropriate prices for services that are almost the same, hence clustering them or organising them in form to ensure an organisation maintains its profit margins. For example, if its room allocation, an organisation should allocate different prices for its available rooms depending on seasons. One main challenge faced by organisations is formulation of a correct management strategy that will ensure such organisations offer customer correct resources, at rights costs and season.

This is because, if an organisation does not use correct measures, which will eliminate variations that may occur as concerns prices charged, customer discrimination is bound to rise. This strategy since time memorial has helped many organisations to determine rates to charge their customers, hence maximise profits throughout business operation.

How to Implement a Yield Management System

For an organisation to ensure it maximises its revenues, it is necessary for it to consider both past and present business occurrences. This is possible through critical study of available data on business operations using econometric tools. This is where historical data plays a central role in that, organisations can use it to make future predictions in terms of customer numbers.

The system generally analyses the number of business transactions that have transpired between a hotel service company and its customers. After consideration of this, then the management can consider other factors external to an organisation. These factors include the number of available holidays, seasonal booking variations, and prices offered by other competitors in the business.

At this point then, an organisation can use a predictor mode to accurately determine demand variations in changing seasons. This system tries to coin operational constraints that may occur in a specific season, and best options that an organisation can use to meet them as it struggles to remain in business and maintain its profit margins (Martin, 2006, Para. 1-3).

Organisations can determine its accommodation prices using the following: services they offer and nature of market (or a blend of the two). To ensure that the adopted yield management scheme is efficient, an organisation must ensure that the nature of service offered is perishable and capital intensive.

On the other hand, models adopted should not only predict the number of nights, which customers will book, but also the length specific customers may spend. In addition, before calculating such rates companies should consider economic factors that can influence its operations depending on the market such a room service company serves, which can be national or international.

Yield management uses software that is either machine installable to determine the prices of rooms or software that is in form of a service commonly called soft-as-a-service (SaaS). An organisation can integrate this in its customer relation management, overall reservation management, the Human resource management or its marketing management program (Powers, 2010, Para. 1-5).

Advantages of yield management

Adoption of correct yield management models helps organisations not only to maximise their profit margins, but also to ensure it offers required services to all their customers, depending on their financial ability. In addition, this strategy gives an organisation a chance to compete with other firms in the room service businesses, which offer their rooms at low prices (Berman, 2005, pp. 17-178).

To workers this strategy is good in that it maximises their potentials. This because, although their duties maybe hectic, they will better customer characteristics, hence help an organisation to improve its service delivery. To customers more so regular ones, this system can be advantageous when an organisation gives them first priority in room allocation. In addition, use of correct yield management models can benefit customers in that; it will safeguard them from malicious businesspersons, who take advantage of seasonal variations to hike prices.

Disadvantages

To customers the whole process is in some cases disadvantageous, in that for common users of such room facilities regardless of the season situation may force them to spend more than they anticipated. To organisations, it is hard for them to maintain customer loyalty, in that some common customers expect special consideration from companies they regularly use. This is because yield management aims to allocate rooms to customers with highest bids, hence sometimes hard to meet such customer’s demands.

In addition, some pricing inventories can make some customers lack confidence in such organisations, which in turn will ruin organisations’ rapport, hence loosing of some customers. On employees, this strategy can be very burdening in that, it will force them to strain in balancing between customer needs and organisational goals (Wirtz, Patterson and Theng, 2001, pp.5-8).

Conclusion

In conclusion, yield management can be of great benefit to organisations, customers and employees, if only an organisation adopts a model that coins all these stakeholders’ views in its formulation.

References

Baker, T., & Collier, D., 2010. A comparative revenue analysis of hotel yield

Management heuristics. Bnet. Available from:
http://findarticles.com/p/articles/mi_qa3713/is_199901/ai_n8828483/(Accessed 4 January 2010)

Berman, B., 2005. Applying yield management to your service business.
Business Horizons, 48(2), pp.169-179.

Martin, D., 2006. A definition of yield management. 4Hoteliers. Available from: http://www.4hoteliers.com/4hots_fshw.php?mwi=1087
(Accessed 4 January 2010)

Powers, E., 2010. Starting a hotel business? Here is how to set prices. Ezine Articles. Available from: http://ezinearticles.com/?Starting-a-Hotel-Business?-Heres-How-to-Set-Prices&id=2531797 (Accessed 4 January 2010).

Wirtz, J., Patterson, P., & Theng, J. P., 2001. Yield management: resolving potential Customer and employee conflicts.
(Accessed 4 January 2010).

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