Elements of Hotel Yield Management – Hotel Front Office

The following elements must be included in the development of a successful revenue or hotel yield management strategy:

  1. Group room sales
  2. Transient or FIT room sales
  3. Food and Beverage activity
  4. Local and area-wide activities
  5. Special events

Group room sales and its effect on hotel yield

Group sales form the majority of the room revenue is very important for hotel yield. It is common for the hotels to receive reservations for group sales from three months to two years in advance of arrival. Therefore understanding group booking trends and requirements is very necessary for the success of revenue management. To understand the impact of group sales on overall room revenue, the hotel should collect as much group profile information as possible, including:

  • Group booking data – Groups tend to block 5-10% percent more rooms than they are likely to need. If a group has a previous business profile, management can often adjust the block on the basis of group’s booking history. The hotel’s deletion of unnecessary group rooms from a group block is called the ‘wash factor’. However management must be careful in estimating how many rooms to be ‘washed’ from the block. If a group block is reduced by too many rooms, the hotel may find itself overbooked and unable to accommodate all the members of the group and it will effect hotel yield badly.
  • Group booking pace – The rate at which group business is being booked.
  • Anticipated group business – Many national, regional and state associations as well as some corporations, have policies regarding the locations of annual meetings.
  • Group booking lead time – A measurement of how far in advance group bookings are made.
  • Displacement of transient business – Displacement is the acceptance of group bookings instead of transient guests. Since transient guests or FITs pay higher room rates than group business, the reservations should consult its forecast staff whether or not to accept group business for better hotel yield.

hotel yield management and its elements

Transient or FIT room sales and its effect on yield

Transient rooms are the rooms sold to free individual travelers. Transient business is usually booked closer to the date of arrival than group business maybe only one to three weeks before arrival. In order to maximize room revenues, front office managers may

  • The booking pace and lead time should be tracked for highest occupancy rate.
  • Classify rooms on the basis of their location, desirability or size, and charge more for better rooms.
  • Hotels may offer deluxe rooms at standard rates to attract guests especially when demand is low to scale hotel yield.
  • Discounts reduce the amount of business lost because of rate resistance and allow the hotels to sell rooms that would otherwise remain vacant. Discounts can be offered to corporate guests, government travelers, senior citizens, military and airline personnel etc.
  • Controlling discounts also is very important for generating the highest revenue and hotel yield.

Food and Beverage activity and hotel yield

While catering functions are considered food and beverage revenue generators, they can have an effect on room revenue. For example, if a banquet with no guestroom requirements is occupying the hotel’s ballroom, a group needing 50 guestrooms and a ballroom may have to be turned away. Therefore a group needing both catering and guestrooms will be more profitable. Hence communication and coordination between departments is necessary to maximize revenue from all revenue centers in the hotel.

Local and area-wide activities and hotel yield

Local and area wide activities like conventions, meetings etc, have a great effect on the revenue management strategies of the hotel. The front office manager should be aware of the activities and the demand for guestrooms created by them in the area. The room rates should be offered according to the demand to take full advantage of the opportunity.

Special events and hotel yield

Special events such as concerts, festivals and sports events held in or near the hotel are also very important for the hotels yield. The front office manager should be able to take advantage of these events by controlling discounts.

Learn more on Hotel Yields …here

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