Yield Management Strategies in Hotel A

This assignment examines the yield management practices implemented at Hotel A, an international chain hotel in England. The analysis focuses on Hotel A's rate structure, categorized into seven levels (A to H), with higher rates being blocked out when occupancy is near capacity. The system also prioritizes business from higher rate categories during peak seasons. Additionally, the case study highlights the role of a dedicated yield management team and their interaction with the front office staff to optimize revenue.

Running Head: SUPPLY CHAIN MANAGEMENT 1
The Importance of Yield Management in Hospitality Industries
Student’s Name
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Date of Submission

SUPPLY CHAIN MANAGEMENT 2
This management paper we shall discuss the impacts of customer satisfaction concerning
yield management practices and quality services on hotel performance. In the same line of
discussion, several other research activities show that the satisfaction of customers directly
relates to ancient measures of quality and yield management practices. The variables of
satisfaction are related positively to firm performance. Such findings are a starting point for more
study but with several managerial implications. Over the decade, the subject matter of several
research activities has been the relationship between financial performance of firms and
customer satisfaction. In the same activities, it has been recommended that Yield Management
has to be implemented in service firms to improve financial performance and customer
satisfaction. However, the challenge associated with such studies is that the effective operation
of Yield Management is not clear (Kaya, 2004).
From one industry to another, Yield Management has several definitions. In one way,
Yield Management can be termed as revenue per passenger mile and states. In simpler terms,
Yield is equated to charged price function for service option that is differentiated. Therefore,
Yield Management is composed of two components; inventory control and pricing. In as much
as the industry of hospitality is concerned, Yield Management is all about controlling trade-off
between occupancy and rates. It is all about selecting the appropriate customer to fill the
available rooms, charging the right prices for the offered services, and aiming to achieve the
highest revenue possible (Kaya, 2004).
Performance and Customer Satisfaction
In the sector of hospitality, some characteristics of Yield Management, which relate to
the satisfaction of customers, are of great importance. Such characteristics include diversion,

SUPPLY CHAIN MANAGEMENT 3
willingness to pay, overbooking, and displacement. Let us consider hotel guests to be divided
into two segments; leisure and business segments. Customers who fall in the business segment
are less sensitive to price. These customers are willing to pay higher prices as long as they make
a reservation in the last minute (Jones, 1999). On the contrary, leisure customers are sensitive to
prices and will always make their reservations early. They are also willing to trade away some
flexibility to have service rates reduced. As a method of preventing customers from buying
down, most hotels use barriers such as non-refundable advance purchases and advance
reservations. According to many study models, customer willingness to pay for services build up
as room availability dates draw closer. However, since this strategy bets on a customer’s
“willingness to pay,” it at times fails to work. In case, there are many rooms still empty late in
the evening, it is important to downgrade the prices of the available rooms (Jones, 1999).
Mostly, a diversion effect occurs because customer segment is not separate. In this
context, diversion is the willingness of a customer to buy a resource that is perishable in a rate
class that is higher compared to the one he or she intended to originally purchase. Several hotels
have tried to incorporate the potentiality of selling-up rooms into determination of available
rooms for different rate classes. Displacement is as well important. Such can be considered when
a customer makes a room reservation for more than one night. The reservation request therefore,
span periods of time when demands for room is high. In such a case, a maximum rate is quoted
together with the consideration of slack periods when the rates are lower. Such effects need to be
carefully handled (Premaratne, 2017). In as much as a hotel can determine a particular number of
reservations in a market segment, the number of resultant sales from such reservations is a
random variable. The reason is associated with no-shows, late cancellations, and room
overbooking. In instances where overbooking occurs, hotel managers must determine trade-off

SUPPLY CHAIN MANAGEMENT 4
leading to idle capacities and turning down clients who have rejection costs associated with their
bookings (Pavan, Cristina, & Patrizia, 2009).
Part II: Employment in Real Life Settings
Pros and Cons of Yield Management
There are two important factors associated with operating hospitality businesses. One is
the use of techniques of yield management and the other is economic law of price elasticity of
demand. Since a systemic approach is available, capacity management and pricing practices can
be best practiced. Through pricing, demand is attracted and captured. Pricing is also linked to
demand and supply services. However, two determinants of price depend on the cost structure of
a company (SCOTT & BREAKEY, 2007). The determinants are willingness to buy and market
perceived value. According to the grounded theory of demand, demand and price are in a
relationship in which if a service price increases, demand decreases. It means that the
relationship between demand and price is linear. Since there is a wide range of customers in the
industry of hospitality with varying sensitivities towards the prices, our argument is based on
demand elasticity in relation to price. In real sense, the leisure segment is more elastic compared
to the business segment. Strategies of yield management are important because they try to attract
highly inelastic and sensitive markets to pay full tariffs (Cho & Choi, 2000).
Exhibit
Our case study focuses on Hotel A, which is part of an international chain in England.
There are 60 rooms in this hotel. On performance evaluation, our hotel has a breakdown of
'acceptable' stay lengths that are categorized in seven rates from A to H. In case the hotel is near
capacity, rates from D to H are blocked out because they are lower rate categories (Salah,

SUPPLY CHAIN MANAGEMENT 5
Fernández, Verdejo, & Casado, 2006) . Reservationists are also ordered to turn away business in
the lower rates if the requested stay length spans higher rates seasons. However, the system can
be over-ridden depending on the individual taking a booking. Since denied bookings are
recorded and stored, recent declines and denials must be reviewed to determine if the hotel
achieved maximum occupancy (Wright, 2017). Within the system, a sub-system allows
customers to make decisions on group bookings and conference. This sub-system will collect
information on such bookings and predict sales mix. There is a core team engaged in yield
management, which is headed by a Reservations Manager. The Reservations Manager liaises
with the Manager in charge of Front Office concerning 15% to 20% of front office reservations.
The Reservations Manager also follows up reservations taken by receptionists of which have
over-ridden the system (Kaya, 2004).

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Reference
Cho, V., & Choi, T. (2000). Hospitality Management. Towards a knowledge discovery
framework for yield management in the Hong Kong hotel industry , 1-15.
Jones. (1999). Yield Management in UK Hotels: A Systems Analysis . Retrieved December 10,
2017, from The Journal of the Operational Research Society:
http://www.jstor.org/stable/3010082
Kaya, A. C. (2004). Yield Management and Performance in the Hotel Industry. Retrieved
December 10, 2017, from Journal of Travel & Tourism Marketing:
https://doi.org/10.1300/J073v16n04_05
Pavan, A., Cristina, L., & Patrizia, M. (2009). YIELD MANAGEMENT AND COASTAL
HOSPITALITY INDUSTRY DEMAND. 1-15.
Premaratne, N. (2017). Yield Management in Hospitality – Important for Efficient Revenue
Management Strategy. Retrieved December 14, 2017, from Rate Gain:
https://rategain.com/blog/yield-management-hospitality-revenue-strategy/
Salah, S., Fernández, M., Verdejo, D., & Casado, S. (2006). A model forincident tickets
correlation in network management. . Retrieved December 14, 2017, from Journal of
Network and Systems Management: http://www.doi:10.1007/s10922-014-9340-6
SCOTT, N., & BREAKEY, N. (2007). Yield applied to destination management: an inefficient
analogy? , 1-12.
Wright, T. C. (2017). The Importance of Revenue Management. Retrieved December 14, 2017,
from http://smallbusiness.chron.com/importance-revenue-management-71942.html