The Truth About Yield Management Pt. 6 – Demands & Solutions

Demands & Solutions

One of the concerns that I have heard around yield management, particularly around last minute deals and reduced rates, is that other guests may learn of it and demand the same offer, thus reducing the amount of total revenue earned even further. While it has been my experience that this doesn’t happen nearly as often as one would think (it requires the customer to monitor your rates and offerings after they book with you, which the majority don’t have the time or inclination to do), it’s a valid concern none the less. There are those handful of guests that continue to shop around even after their stay is booked.

I don’t believe that there is one right or wrong answer for this situation. In my experience the best option for any situation like this comes down to considering the various factors involved and then making the best decision that you can based on the information that you have.

The various factors that can play into this are;

The Guest: Who are they and are they worth keeping as a customer? If they are a loyal customer that always writes positive reviews about their stay and has recommended your company to their friends and family, I would be inclined to give them the deal, or at least some kind of reduction. Particularly if the difference is small.

On the other hand, if this guest is always a pain to deal with, complains about everything, and leaves the unit a mess, I would be inclined to hold my ground on the price. Why lose money on a guest that you really don’t care to have back and probably isn’t saying nice things about you anyway?

The Unit: Is it a high end unit that rents for a premium? Is the unit comparable to other units where a deal has been given? If the guest is staying in a high end unit and asking you to match a deal that was offered on a more economical unit, you could offer the deal but in a different unit that is more in line with the price they will be paying. (Assuming there is one available.) You could also offer to split the difference, give them an extra night for free, or a discounted or complimentary activity (jet ski rental, movie tickets, etc.).

The Owner: Will the owner of the unit mind you offering a reduction? Will they ask 20 questions and critique your reasons for price matching? Is making this guest happy worth the tradeoff of potentially upsetting the owner? Perhaps offering the guest a price match in a different unit is the way to go.

The Cost: Will offering a deal reduce the stay to a loss for your business? Will you be setting a dangerous precedent with this guest that will teach them to expect reductions in the future?

The Season: Is this the high season when you are booked nearly to capacity and what is still available is going for a premium? Or is this the low season where quite a bit is available and you can afford to wiggle on the price a little?

Again, I don’t think there is one right answer to this kind of situation. I think it’s wise to weigh all of the factors and make the best decision that you can. I also don’t think it’s right to cave in to the customer just because they ask for a deal, but if a win-win-win solution can be found that keeps everyone happy (the guest, the owner, and you) then that is the best option for everyone.

If you decide to say “no”, for whatever reason, don’t apologize for it. You can simply explain that particular deal is no longer being offered, or is only for certain units, or their stay does not meet the criteria (assuming that all of these things are true), but you would be happy to offer them a reduced rate on their next stay if they book before they check out.

But that’s not all!

There are other factors that play heavily into customer satisfaction that could encourage them to ask for a discount, prevent them from coming back and/or recommending you to their friends and family.

The Center for Hospitality Research at Cornell University found the following issues had the most impact on customer satisfaction.*

#1 Problems experienced during the stay – whether it was the hot tub not working, the internet being down, or the unit being dirty, this was the biggest factor that negatively impacted customer satisfaction.

#2 The Reservation details were inaccurate – incorrect dates, party size, etc.

#3 Billing errors – incorrect amounts, showing outstanding balances when they guest was actually all paid up, etc.

#4 Check-in took longer than 5 minutes – this may or may not apply depending on the type of units that you have, or whether the guest needs to check in at all. Regardless, it does have an impact on customer satisfaction.

Here’s why this is all relevant, delighted guests spend much more than dissatisfied guests. In this particular study, delighted guests spent almost 50% more on ancillary offerings than dissatisfied guests did. Great customer satisfaction directly translates into more revenue.

I think it’s important to remember that in trying to grow your business, maximize revenue, create new revenue streams, enhance your offerings, etc., it is easy to forget that the guest experience still has to be positive in order to turn them into a repeat guest and/or an advocate for your business. Losing sight of this will undercut your efforts in those other areas.

*Data taken from the report “Making Customer Satisfaction Pay: Connecting Survey Data to Financial Outcomes in the Hotel Industry”, Cornell Hospitality Industry Perspectives, No 5 July 2010.