The Truth About Yield Management – What Is It?

One of, if not the topic I think is most misunderstood in the vacation rental industry is yield management. I’ve seen it spark heated public debates about discounting and margins, as well as get dismissed as “something hotels do”.

So what is it exactly?

I like how Glenn Withiam of Cornell University, a school that has been studying yield management for decades, defines it. He says that yield management is “the umbrella term for a set of strategies that enable capacity-constrained service industries (like vacation rentals, hotels, and airlines) to realize optimum revenue from operations.” (Emphasis mine.)

He goes on to say that “The core concept of yield management is to provide the right service to the right customer at the right time for the right price.”  (If you care to read the entire paper, which is very good, you can do so here.)

The right service. To the right customer. At the right time. For the right price.

So, if you charge more in the summer season than you do in the winter season (or vice versa if you are in a winter destination) then you are doing yield management. Some travelers are willing to pay a higher rate during peak travel times and you are using that to your advantage to optimize your revenue.

Another way to describe yield management would be to say that it is taking advantage of supply and demand in order to maximize revenue.

None of the above sounds like blanket discounting or something that only hotels can do. And, if you are lucky enough to have vacation rental software with the capability to handle these scenarios, you can set it up to do all of the heavy lifting for you.

Next: The 5 Cs of Yield Management