ForwardMarkets: How Hotel Room Pricing and Other Forms of Yield Management Work
How Hotel Room Pricing and Other Forms of Yield Management Work
1. The Golden Rule of Yield Management is discrimination. You absolutely have to be willing to say no to some customers.
2. Segment theoretical customer base by price elasticity as a function of one or more identifying characteristics (how far in advance they’re booking, how long they want to stay, age, sex etc).
3. Constantly re-optimize price schedule for each of the above customer segments as a function of available supply as a function of time, usually with a profit maximization objective, although revenue stability can also be worked in.
4. Define customer profiles given the identifying characteristics defined above.
5. When a customer contacts you, capture their characteristics and look up what pricing category they fit into and quote the associated price.
6. Possibly have a set of dynamic rules to handle customer objections with alternate offers (allow customers to be reclassified in real-time).
7. Always remember rule #1.
ForwardMarkets: How Hotel Room Pricing and Other Forms of Yield Management Work