Yield channels. O`Conner et al (2008) has studied the

Yield Management in
hotels

Akshay Ravi (17020), Archana R. (17032), Gandrakota Vishodhan (17050),
Karthikeyan AR. (17068), Mutyala Srijanani (17086), Parvathy Menon (17104),
Sanjhay R. (17125), Vishnu Unnikrishnan (17164)

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                School of
Business, Amrita University, Coimbatore

 

Abstract: Yield
Management is a widely used practice in any business that has its main
objective to enhance its revenue or profits. The main objective of this
literature is to study Yield management in the Hotel industry. This paper
provides a literature review of two articles published on Yield management in
the Hotel industry. The models used in the articles were used to study the
implementation processes, factors external and internal factors that could have
an impact on the YM technique adopted, the visible differences between
organizations with computerized YM and those with non-computerized YM
technique.

 

Introduction:-

Yield Management is the process of varying prices on the
basis of forecasted demand to maximize revenue or profit as per the
requirements of the organization.

Hotels being a large player in the hospitality Industry has
a dire need to manage demands through various price strategies to enhance
revenue or profit thereby efficiently provide accommodation services to
consumers. Yield management (YM) can help in the hotel business to serve the
right customers by providing the right price at the right time. Yield
management when handled systematically to manipulate the room prices in
accordance with the demand forecasted and aided with the right technology can
serve as a revenue/profit generator in this industry which has huge demand all
over the year.

Yield Management however has a number of factors to be taken
into account, such as the technology used, variety of electronic distribution
channels. O`Conner et al (2008) has studied the influence of yield management
across various hotels considering the various electronic channels (direct and
indirect) through which this perishable service reach the customers. Emeksiz et
al. (2006) has studied the YM practices aided or not aided by computerized
technology in 5-star hotels.

Background:-

 

 

 

 

Methodology:-

This study is all about the role of Yield management in the
hotels sector, implementation process, various issues faced during this process
and factors that could have an impact on.

The keywords “Yield management” and “Hotels” were used to
search for journal articles related to the topic. Google search engine was used
for the search. 5 articles relating to the topic were found. After a brief
overview of the abstract and the introduction, the articles were checked for
their respective ratings in the ABDC portal. The articles with rating B and
above were taken into consideration. The study by Emeksiz et al. (2006)
provides a new model implemented for Yield management in five star hotels.

 

Literature Review:-

A
yield management model for five-star hotels: Computerized and non-computerized

Implementation

The study conducted by Emeksiz et al. (2006) was to identify
and infer the various issues that could arise and the impact the new model can
have on the business overall on the operational as well as financial fronts when
an enhanced model created for YM is used in a five star hotel environment. The
study provides an idea of the various stages in the implementation of Yield
Management. One of the factors assumed to impact is the influence of presence
of a computerized system in yield management to manage the upcoming demands in
sectors like that of hotels that provide perishable services to consumers. This
study takes us through various stages of an YM Process.

A pilot study was conducted with three hotels in Turkey all
but one of which had CYM (Computerized Yield Management). The potential issues
that could arise were studied and a 5-stage model of YM was developed with
reference to the results of the pilot study.

The 5 stages are:

·        
Preparation

·        
Supply
and demand analysis

·        
Implementation
of YM strategies

·        
Evaluation
of YM activities

·        
Monitoring
and revision of the strategy

Two sets of questionnaires with 45 questions for hotels that
adopted CYMS and 46 questions for those hotels that did not, were prepared and
posted to all the 118 five star hotels in turkey.

Results:-

Despite the fact of differences present in the Computerized
YM and non-computerized YM processes, this model is applicable for both. Implementation
of the right YM technique in accordance with the management strategies of the
business can enhance revenue up to 5%.

Inferences from the study:-

·        
The presence of a designated yield manager who
has the sole responsibility of YM is necessary in an organization.

·        
The way customers react in case of a wide range
of prices is essential to know how price discrimination can be formulated to
avoid adverse effects.

·        
A SWOT analysis is essential to determine the unique
strengths that are possessed by the organization in implementing the YM
technique

·        
The analysis of the demand, competitors’ pricing
strategies and its other factors that may have an impact on the business must
be done for successful implementation of YM.

·        
Managerial approval and support and
compatibility of the YM model to the management strategies are essential for
smooth functioning.

·        
Evaluation of the YM technique on a periodical
basis is necessary.

·        
A regular monitoring to ensure that the system
installed is free of errors can enhance productivity.

 

Hotel yield management
practices across multiple electronic distribution channels.

 

The study done by O’Conner et al. (2008) concentrated on the
three major research questions based on price discrimination, choice of
electronic channels to reach the end consumers and reduction of price on
indirect channels in case of increase in demands for rooms. A metric known as
Room price index was borrowed to study the overall demand of hotel rooms from
economics and adapted techniques. The sample studied was hotels of four and
five star statuses in various cities of Europe.

Results:-

The results obtained stated a positive correlation between the room price and the change in
demand. The reduction in the number of channels allocated to a rise in
demand is difficult compared
to the increase in the number of channels allocated to a fall. The negative correlation that was observed between the market trend and the price allocated to direct channels and the third
party channels was found to be insignificant and it was concluded that there exists no relationship between the
above discussed variables. However, on taking a
few hotels individually into
consideration there did seem to be some positive correlation depicting that the usages of this technique to increase the contribution cost of direct channels to reach more number of consumers in
cases of increase in demand.

Conclusion:-

This study
throws light on the fact that highly varying prices for different customers may
have an adverse effect on customer relationship, and can undermine the revenue
and ultimately the profitability of the business. It is always necessary to
know the demand and supply before decisions on price discriminations are made.
Though the presence of a specialized YM manager is necessary to implement the
YM process, it is mandatory that all members in the organization be aware of
the YM implementation. Continuous monitoring of the process has to be done. Solving
of problems during the implementation can increase the efficiency of the system
and the overall productivity of the business. Constant examination of the
processes that take place in each stage and the results obtained can help
achieve this.

Analysis of
the type and number of channels through which the service reaches the
consumers, having a computerized system etc. can be an added advantage and
provide extra benefits.

However these
studies are conducted taking four and five star hotels into consideration. So
there is not enough evidence if YM implementation would actually be useful in
other lower tier hotels. This prevents from the results of this study from
getting generalized to the whole of the Hotel industry.

Further
research can be conducted in the future to understand the impact and the
usefulness of Yield management for the hospitality industry as a whole.

 

References:-