The Outcome of Revenue Management on Hotel Chains

Yield, or revenue management, is the procedure by which sales of a partial quantity of goods, such as hotel rooms, airline seats, apartment leasing etc. are managed in order to exploit profits. Thriving yield management focuses on selling the product in such a manner that is timely, price competitive, and directed towards the right subset of customers. Yield management has evolved in more recent years as an important tool particularly for the airline and hotel industries for staying efficiently competitive in otherwise saturated business playing fields.

The basic concept of yield management is based in the economic principle of supply and demand: when supplies are short, prices go up; when supply is high, prices go down. Yield management is a studied, systematic method by which managers can logically place customers within the supply demand spectrum, and thus gain the highest yield for their products.

For example, a customer who has very little flexibility in his or her travel plans is the customer who is most likely to pay a higher price for airline tickets and hotel rooms. The customer with a great deal of flexibility is not as inclined to pay a higher price.

Many ones like London day spa rate their achievement by their occupancy levels, but this isn't necessarily the best measure of success. Another way to rate a hotel's performance is by determining its REVPAR, or Revenue per Available Room. REVPAR is measured by dividing the total room revenue by the total number of rooms. For example, a hotel that makes $6,000 one night with a total number of 100 rooms has a REVPAR of $60.