3 thoughts on “How to Make Yield Management Work for Your Vacation Rental Business”

  1. At the heart of yield management decision-making process is the trade-off of marginal yields from segments that are competing for the same inventory. In capacity-constrained cases, there is a bird-in-the-hand decision that forces the seller to reject lower revenue generating customers in the hopes that the inventory can be sold in a higher valued segment. The tradeoff is sometimes mistakenly identified as occurring at the intersection of the marginal revenue curves for the competing segments. While this is accurate when it supports marketing decisions where access to both segments is equivalent, it is wrong for inventory control decisions. In these cases the intersection of the marginal revenue curve of the higher valued segment with the actual value of the lower segment is the point of interest.

    1. Thanks for the thoughtful response! I agree that you don’t want to make the wrong trade-off, which is why it is critical to use historical data to make your yield management decisions. I.e. you likely want to turn down the lower revenue guest during a peak booking period. On the flipside, in a low booking period they will drive extra revenue. Every season has it’s own booking cycle and it is crucial to know how that breaks down for your individual business.

  2. Firms faced with lack of pricing power sometimes turn to yield management as a last resort. After a year or two using yield management, many of them are surprised to discover they have actually lowered prices for the majority of their opera seats or hotel rooms or other products. That is, they offer far higher discounts more frequently for off-peak times, while raising prices only marginally for peak times, resulting in higher revenue overall.

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