There are a number of strategic levers that must be considered for yield management to be most effective. You don’t want to raise or lower your rates based on a gut feeling, or pull a number out of the air. As I mentioned in the last post, I’ve often heard yield management referred to as blanked discounting. But remember that yield management is presenting the right service to the right customer at the right time for the right price.
The following data points can help you determine the best way to utilize yield management for your business.
Calendar – the time of year the booking is for plays a major role in yield management. Many businesses do this already by increasing their rates in their high season and lowering them in the shoulder and off seasons.
Clock – the amount of time between when the booking is made and the arrival date. You may choose to charge more during peak booking season where arrival is 90 days from check-in on average, and offer a reduced rate if the booking is made 3 days before arrival when the chances or renting that unit are a lot lower.
Capacity – the number of stays that are booked already. Supply and demand should greatly inform what you charge for a particular stay.
Cost – the amount that you charge based on the above three factors.
Customer – the most important C. Without customers you wouldn’t have a business. The key here is that not all customers have the same needs or characteristics. A family taking their yearly vacation is going to have different needs and a different budget than the lone traveler that decided to get away for the weekend at the last minute.
Finally, we could add another C to the mix; Cover, as in “cover your costs”. You want to make sure, especially if you are offering a reduced rate, that your costs are all covered. None of us go into business to lose money.
These factors all come together in various ways to help you determine what you should be charging a customer at any given time for their stay. Of course pricing is just one component of the customer relationship. You also have to make sure that you are providing a quality product/experience and delivering value.
Next – The Numbers