It is a pricing strategy, which are commonly used by hotel companies, airlines and other businesses in fields related to tourism, in order to generate maximum revenue from a perishable inventory.
At the time of taking off the plane, it is better to have sold tickets for all seats, even at a lower price, than to lose that money. From the point of view of the accommodation, when a date arrives, it is better to have the hotel rooms occupied, even at a reduced rate, than to remain incomplete.
In both cases, the fixed costs that companies must face are the same, whether they work at maximum capacity as if they do so at a minimum and, that is why the approach it provides is so useful yield management.
What is it yield management?
Yield management is a strategy based on the right customer sale, at the right time and at the right price. The greater the number of sales made within the framework of this strategy, the more possibilities of maximizing the income obtained.
For many, it is an approach similar to revenue management, but in reality, it is not so, since:
- It exists for a longer time.
- It has a more limited focus.
- It only cares about the sale price and the volume of sales, so that the best possible income performance can be achieved.
The basic concept behind the strategy of yield management is that certain fixed and limited time resources, such as hotel rooms, can be sold at different prices, depending on the time of the year, the level of demand, the amount of rooms already sold and a wide range of external factors that would leave adding to the equation.
The same product (that is, an aeroplane seat or a hotel room) can be sold to two different customers at completely different prices, due to the amount of variables involved in the process. The way to succeed in this strategy is to adopt a data-based approach to ensure that prices are adjusted to the maximum and optimize business results.
Why is yield management important?
The adoption of a strategy of yield management It allows entrepreneurs, through the use of past performance data and general industry trends, to anticipate demand and respond accordingly.
Thanks to this approach, it is easier to understand the basic concepts of the business and focus on optimizing the pricing and sales strategy of the available resources. This allows hotel owners to avoid losses, improve their image for customers and position themselves better in a market where it is common for competitors to pose countless challenges.
Nowadays, the strategies of yield management they are usually supported by technological tools for dynamic pricing, which modulate supply based on circumstances and demand.