Chapter 6 Yield Management

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CHAPTER 6
Yield Management
Yield management
There are various pieces to the yield management 'Jigsaw or puzzle’. Securing higher
occupancy or raising the rate of the rooms increases the hotel’s revenue – the best possible
return will be a combination of both of them.
Hotels like an airline have gradually realized that the same kind of situation applies to them.
They need to consider:
 Which types of bookings or business are most profitable for them

 How they can secure profitable, guaranteed bookings in advance
 How they can use different room rates to secure bookings from the most profitable
market segments.
 How they can use flexible room rates and bookings to manipulate demand: charging
higher rates when demand is strong, and lower rates during low demand.
When is yield management appropriate?

Yield management depends on reserving blocks of rooms for more profitable market segments
and only making those rooms available to less profitable market segments when necessary to
increase demand.
Average length of stay

1. The mean average is the total value of items divided by the number of items.
2. Average length of stay LOS= Total number of guests night sold in a given period
Number of guests
Guest origin
Segment % by region/country = Number of guests from a region/country x 100
Total number of guests
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Average guest expenditure

Average Guest expenditure = Total revenue generated from in house guest in a given period
Number of guests in the same period
Source of booking
Segment % by revenue/ source = Number of guests (or revenue) from booking source x 100
Total number of guests (or revenue)
Occupancy and revenue statistics

Room occupancy percentage
In general, the figure for 'total rooms available' is the number of rooms in the hotel:
adjustments tend not to be made for rooms which are temporarily 'out of service' (e.g. for
maintenance, decoration or staff use), as this gets in the way of meaningful comparisons.
Room occupancy = Room sold/ occupied x 100

Total room available
Sleeper occupancy percentage
Bed occupancy = Number of beds / Sleepers X 100

Total possible beds / sleepers
Double occupancy = Double / twins sold with 2 persons X 100

Total number of double / twin room
Revenue, yield and profit statistics

Average room rate (ARR) or average daily rate (ADR)
The average room rate (ARR) or average daily rate (ADR) shows how much a room is being sold
for across the hotel. Why is this useful?
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 ARR can be compared with a known breakeven rate (the rate at which the hotel is
covering its costs on a room), to ascertain whether the rooms division has made a profit
on a given night.
ARR/ADR = Total room revenue on a given day ( )

Total room sold
Yield (percentage revenue achieved)

Yield = Total room revenue (rooms sold x rates charged) x 100
Potential room revenue (total rooms x full rack rates)
RevPAR (Revenue per available room) / Room yield

In a hotel charging a per-room rate that is the RevPAR is calculated, simply, as:
RevPAR or Per-room rate = Room revenue in a given period

Number of available rooms
RevPAR = Average room rate X room occupancy % in a given period
GOPPAR (Gross operating profit per available room)

GOPPAR = Gross operating profit (total revenue – total costs) for a given period
Total rooms available
Front office reports

Daily occupancy reports
An occupancy report is usually prepared daily, either by night audit staff or by the last shift on
reception duty. Note that:
 Different room types are listed separately.

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 Complimentary and House use rooms are listed separately

 The 'room revenue' figure can be cross-checked against the amount posted to guest
bills. The ADR can be mentioned also.
 No-show and cancellations are expressed as a percentage of reservations.
Occupancy forecasts
It project historical patterns and trends forwards to help I forecast or estimate future
occupancy levels.
A three-month forecast is often used for purpose.
Short-term forecasts is also needed:
 A monthly general forecast of occupancy can be made by front office

 A five-day forecast is often produced by front office to cover the next five days
Departmental notifications
In a computerized system, the sharing of information between different departments of the
hotel is comparatively easy through Traces.
Arrivals list
An arrivals list is prepared one day in advance, showing a list of all arrivals expected on the
following day, the arrivals list will be circulated to:
 The concierge, porter or enquiry desk

 The switchboard
 Housekeeping
 Guest services
 Guest relations
Operational reports: Housekeeper's report

The housekeeping department should compile a report on the status (and status) of each room
in the hotel, as it checks, services and inspects them during the morning.
The night auditor should check the housekeeper's report against the front office room status
records, to identify any discrepancies that may need investigation or correction.
This is called the Rooms discrepancies report.

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36

 Which types of bookings or business are most profitable for them

When is yield management appropriate?

Average length of stay

Average guest expenditure

Total number of guests (or revenue)

Occupancy and revenue statistics

Room occupancy = Room sold/ occupied x 100

Sleeper occupancy percentage

Bed occupancy = Number of beds / Sleepers X 100

Double occupancy = Double / twins sold with 2 persons X 100

Revenue, yield and profit statistics

ARR/ADR = Total room revenue on a given day ( )

Yield (percentage revenue achieved)

RevPAR (Revenue per available room) / Room yield

RevPAR or Per-room rate = Room revenue in a given period

RevPAR = Average room rate X room occupancy % in a given period

GOPPAR (Gross operating profit per available room)

Front office reports

 Different room types are listed separately.

 Complimentary and House use rooms are listed separately

A three-month forecast is often used for purpose.

Short-term forecasts is also needed:

 A monthly general forecast of occupancy can be made by front office

 The concierge, porter or enquiry desk

Operational reports: Housekeeper's report

This is called the Rooms discrepancies report.

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