Yield Management Seminar 22.01.09

8/14/2019 Yield Management Seminar 22.01.09

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An Introduction to YieldManagement

Mark Harris

Marrying Supply & Demand…



Or…

“The biggest sin is to

overprice, and the secondbiggest sin is to underprice.”

George Goring



Who am I?

• 20 years in business travel

• Business Travel Industry Personality of the Year 2007

• Writer, publisher, sponsorship,conference moderator & speaker

• Former Marketing Director:– Expotel, First Option

– Institute of Travel Management

• Started TIN 2005

• Past/current clients include

– Hotel Booking Agents Assoc, MPI– BSI, Grass Roots HBI, Apartment

Service

– Business Travel Market, Classic BritishHotels



What we do





Seminar Timetable

• SESSION 1– Presentation

– What is Yield Management?

– Q&A• SESSION 2

– Workshops

• SESSION 3

– Group presentations– Discussion

– Wrap up



Our topic

Yield Management

Revenue Management

DISCOUNTING



So what is it?

• An inventory management system thatallows hoteliers to:

– Forecast supply

– Forecast demand per market segment– Adjust pricing strategies accordingly

– Determine group block sizes & cutoff dates

– Set preferred arrival/departure patterns

– Set reservation restrictions

– Create food and beverage guidelines



Or…

• Sell the good product tothe right person at theright time

• Increase revenuethrough customerselection

• Select the guestaccording to the revenuepotential

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Origins?

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Global Distribution Systems

• GDS systems launched by airlines in early 80’s

• Displays inventory to travel agencies worldwide

• GDS serve 500,000 travel agencies worldwide

• Developed when reservations made by phone, faxor telex

• Hotel booking agencies pre-date GDS

• Being overtaken by online distribution– Less costly – GDS fees have to be factored into rates

• Few independent hotels on GDS• GDS providers now down from 5 to 2 - Amadeus,

Sabre & Galileo



• REVPAR– Revenue per available

room

– Total accommodationrevenue / roomsavailable

– Allows different hotelsto be compared

• TREVPAR– Total revenue per

available room

– Total hotel revenue /rooms built

• ARR– Average room rate

– Total accommodationrevenue / rooms sold

• TO/OCC– Number of rooms sold /

number of rooms built

RM Definitions



Example

• 3 hotels

• Same size (52 beds)

• Same area

• Which is the best revenue performer?



OccupancyOccupancy

AverageAverage

Room RateRoom Rate

Hotel AHotel A Hotel BHotel B Hotel CHotel C

92%92%

£91£91

63%63%

£126£126

98%98%

£79£79

Which hotel makes most money?

Revenue £4368 £4158 £4029

Revpar £83.74 £79.38

£77.42



The evolution of RM in hotels



RM in other sectors

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• Fixed capacity: impossible to adapt the size of the hotel tothe demand on a short term basis.

• Perishable inventory: impossible to re-use unsold rooms ata later date.

• Ability to segment markets: various booking behaviourscan be observed.

• Products sold in advance: there is a reservation process

• Fluctuating demand: level of demand is not the samedepending on the day of the week or on the month

• Low cost for an additional sale: variable costs are very lowand any additional sale will contribute to cover overheads.

Implementing RM– you need…



Transient

GroupsMICE

Leisure

Travel market segments



Know your customer…

CorporateLeisure

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• Market more and more challenging– Increased competition

– Corporates downtrading

– Credit crunch discouraging leisure travellers

– Meetings avoidance/alternatives, e.g. VC

• Too risky to increase rates

• Hotels draw clients from different marketsectors

• They pay different prices

• So the best way to increase revenue is toselect the customer!

Driving rates = driving revenue?



How price is set



Managing the inventory



Hospitality market 2009

• Corporate business down by 30%

• Leisure business down by 40%

• RevPar predicted drop by 5 – 10%

• Demand is unpredictable

• Pressure on hotels to cut rates

• 5* hotels may have to take 4* business,

and so on downwards



Action Plan to drive RM

• Increased conversion of phone enquiries– Closer communication with res teams

– More mystery shopping – listen to customers

– Improve training

• More pro-active marketing– Strength of £ to drive UK long/short breaks

– E-marketing offers greater measurability

– Benchmark the competition

• Add more value– Rates inc breakfast, car parking etc

– Examine T&C’s – do they meet current market needs?



2009 – main RM challenges

• Market conditions– Customer demanding lower rates and more VFM– Rate reductions drive short term occupancy but can

damage image/reputation.

• Technical issues– Forecasting– Overbooking– Asset tracking

• More informed customer– Fewer bookings via agents

– Used to dynamic pricing & online booking• Corporates learning how RM works• Commercial acumen of Revenue Managers



Future of RM

• Increased reliance on technology will see RM expandto all areas of hospitality

– Spa’s

– Function space (and integrate with rooms)

– F&B• Lots of scope for improving RM techniques

• Revenue Managers recruited from outsidehotels/travel to handle more sophisticated systems

• OR – could be outsourced• BUT – recession may make RM forecasts based on

2008 data redundant



RM & the corporate –key messages

• Understand additional spend in negotiations

• Automation must be robust

• Moving business to shoulder nights benefits buyer& hotel

• Closer management of production vs forecast

• Better understanding of hotel targets

• Keep communication simple throughout process



Q&A

End of Part 1



Session 2

Workshops



Workshops

• 3 groups

• Different types of hotel

• Objectives– Identify likely issues

– Outline rates strategy for 2009

– Outline other activity to support

– Quantify projected benefits

• You have 30 minutes to prepare a presentation



Group Composition

• Group A

• Group B

• Group C



Group Scenarios

• Group A– Central London 4-5* large chain hotel

– 200+ bedrooms

– Rack rate £140 per person per night

• Group B– Manchester suburban 3* small chain hotel

– 100 bedrooms


• Group C– Llandudno Junction, private 1-2* seafront hotel

– 15 bedrooms




Session 3

Group presentations

Discussion

Final Q&AWrap



Thank you.

Mark Harris

Travel Intelligence Network

[email protected]

mailto:[email protected]

mailto:[email protected]

Documents

Yield Management Seminar 22.01.09