Gate # 7: Revenue and Yield Management

In order to understand the concepts related to GATE # 7, we apply the following definition: 'through the the delicate balance of demand and supply management, determine the appropriate offer and pricing of each and every transaction'. It has become abundantly clear to us through our years of applied research, that many destination suppliers deal with the customer that just shows-up, as opposed to dealing with the best target customer to our destination.

Traditionally in the hotel business General Managers have been regarded on the basis of volume and occupancy, not necessarily on the accountability for profit. Making deals with wholesalers or tour operators which in effect, abdicates the control and responsibility for marketing to this commodity driven channel, is both dangerous and costly. When looking at revenue and yield management, one must consider a seemingly never ending list of variables, upon which, day to day and sometimes even minute to minute, decisions are based.

Variables such as season, weather, special events, categories of rooms or services, pricing strategies, packaging, target segmentation, demand pressure, supply competitiveness and more, all relate to define the selling strategy on a room by room basis. Having this as an approach, the mindset then that must be to begin with this simple concept; that if I am going to sell just one room today, what is the maximum amount I am going to get paid for that room, knowing all the things I know about my marketplace. Then, look for that one buyer willing to pay what I have decided I must achieve in rate. Simple, right? Well the concept certainly is, the implementation is difficult and yet rewarding.

To be very clear, this is not about ripping-off a customer. One of the greatest variables we deal with everyday is of course 'value perception'. In the concept of pricing, there must also be the sensitivity of the customers perception for value, which will drive satisfaction, hence aid in the propensity for repeat visitation!