Yield Management is a sales optimisation technique based on 3 fundamental elements:
- fixed inventory
- perishable product
- fluctuating demand
Because a hotel has a certain number of rooms built (fixed inventory), that these rooms – if they are not sold tonight – are lost (perishable product) and that demand is variable that Yield Management techniques can be applied.
It’s easy to see that it’s better to sell for less than not to sell your room at all. But beware of misconceptions: Yield Management does not always mean lower prices. In some cases it does, because an empty room costs us a lot (opportunity cost), but in other cases, where demand is predictable and on target, Yield Management can increase the average selling price.