The intelligent use of yield management principles can be used to increase bottom line profitability in any service industry possessing the following characteristics:
· Demand for the service can be divided into distinct market segments and price elasticity varies among the customer segments.
· The capacity supply is relatively fixed and it is costly or impractical to add or subtract inventory in the short run.
· The inventory is perishable and cannot be stored to be sold at a later date.
· The marginal cost of selling an additional unit of inventory is low.
· The service is ordered in advance of its delivery / consumption.
· Demand for the service fluctuates and cannot be predicted with a high degree of certainty.
· The physically (not commercially) identical product can be sold to different market segments for different prices under different booking conditions.
Clearly, hotel rooms fit that product / service profile
1. Demand can be segmented into business and pleasure segments using discount rate restrictions.
2. Hotels have a fixed number of rooms and cannot add 100 rooms when a major convention is in town.
3. Hotels cannot sell last night’s unsold rooms today.
4. The marginal cost of cleaning and making up a room plus incremental supplies and utilities is low relative to the additional revenue, generated by a unit sale.
5. Reservations for rooms are accepted days, weeks and months in advance (even years for major conventions).
6. The demand for hotel rooms exhibits regular seasonal and day-of-week patterns, but cannot be forecasted precisely for any particular night.
7. Different, demand driven inventory controlled rates, combined with segment-specific booking restrictions (fencing), are at the core of modern Yield Management applications.
In order to fulfill the requirements of the hotels operators, it is essential that the Hotel Management Software shall support the control & management of the Yield Management of the hotels.
