Is anyone successfully using yield management/revenue management

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JerseyBoy's picture
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I am wondering if any folks on the forum have been using revenue management techniques and if they have what types of  things have you been doing and are you able to see a defined benefit? 

I am looking at things such as:

1.  rate adjustments either up or down base on current occupancy

2.  rate adjustments either up or down base on rate intelligence tools (Both Expedia and Booking.com now offer free tools to do this)

3.  Things like up-selling extra nights at a discounted rate (for example, including on a confirmation e-mail "add and extra night to your reservation and receive 10% off the entire reservation")

I attend many hotel and lodging industry seminars, travel industry seminars, and marketing seminars and this topic is covered a lot and generally the consensus is that it has a positive affect on revenue and profit, but I'm looking to see if anyone in our industry has practical experience that they are willing to share.

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   Our deal is we do one night stays during the summer.  Only a very select few do here.  Word gets around fast, who does.  They have to call us for that one night stay and we put them in the room that the other one nighter has, so it frees the other rooms for the longer stays.  We add $25 to the price for that one night.  The guests are thrilled and we feel better about redoing it so much more often.  So far we had only one person get mad about the price jump and said that she'll book it online where its cheaper.  I said that it was fine if she did it that way.  She called back and took the room at my price when she realized she couldn't get a one night stay online.

   We don't do OTAs except for Air.  They only charge us 3% and we would have gotten that charge by swiping a card.  We have found that Air is sweet to us.  Not many inns are on it in our area and those that are not ready to stay in someone's extra bedroom book with us.  First it was just college students but now we have all ages including grandparents booking through air.  We have it listed under our name instead of the inn's name so it doesn't compete online with our website for guests.  I knew this is a-uh-heated topic…. but it works for us.

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Generic's picture
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One of the few features that I have been BEGGING John from RK to program in is a system to handle single night requests or abutting requests, as I call them.

Say you have someone booked to stay on Wednesday to Friday, there should be a way to allow Tuesday to be sold as a single night, since it won't create an empty spot. You also need to be able to have it allow the Friday night to be sold if you want to or Saturday is sold, but block it if you want the 2 night minimum to stay in place.

Another feature that would be nice would be the 2-night minimum hole. Say you have someone for Friday to Sunday, when someone tries to book Monday to Wednesday, it would not offer the room, since it would create a single night hole, if you didn't want it. The way the OTAs handle this is called Closed for Arrival. They also have Closed for Departure option. But in order to switch to CfA or CfD, RK would need to move from using tables for pricing to spreadsheet pricing. Which, if you ask me is preferable, but I just work around his table pricing.

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Lee2014's picture
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   That would be great!  Right now our website can only do all two nights or all one nights.sad  Right now we have it set to one night for the winter but two nights for the other seasons.  With Air they do it by room so we have our smallest rooms available for one night and the others for two.   Hey Reskey!  Can you hear us?!?

Morticia's picture
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You mean do it using a rule you create? Rather than having to manually open or close a single room or night? 

I don't deal with this as much because we do single nights all the time. What I'd like is to force a one nighter into that one empty room, which I do on the phone, but can't do online without making the other rooms all two nighters. Manually.

 

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Generic's picture
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It will allow a single night in a hole. So if Tuesday and Thursday are booked, it will over-ride the Wednesday night minimum (if you set it to do it). What it won't do is let you book Wednesday night if Tuesday night is available, even though Thursday is. 

https://uploadpie.com/TAlwYh <--- image 

I have a 2 night minimum. It is set to override and allow Jan 12th to be booked. But I would like it to allow January 13th to be booked next to the blue square, since the reservation doesn't create a hole. But NOT allow any other Jan 13 to be booked because of the 2 night minimum.

Generic's picture
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It will allow a single night in a hole. So if Tuesday and Thursday are booked, it will over-ride the Wednesday night minimum (if you set it to do it). What it won't do is let you book Wednesday night if Tuesday night is available, even though Thursday is. 


I have a 2 night minimum. It is set to override and allow Jan 12th to be booked. But I would like it to allow January 13th to be booked next to the blue square, since the reservation doesn't create a hole. But NOT allow any other Jan 13 to be booked because of the 2 night minimum.

(second attempt with image embedded)

JerseyBoy's picture
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Generic, there are some options where you can set allowable days to arrive and allowable days to depart as well as forcing people who book Friday to also book Saturday or vice versa.  Maybe a combination of these will get you closer to what you are looking for.

Generic's picture
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Nope. Not at all. This does. But using pricing rules rather than tables doesn't allow it.

JerseyBoy's picture
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We use Airbnb too and I was actually surprised this past year how much business we ended up doing through them.   I never thought about setting it up under our names instead of referencing the B&B.   That's an interesting idea.

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Also make sure you have a picture with your phone number on ie B&B sign - means they can call if they want to

Lee2014's picture
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   A bunch will search our inn name and then call us.  We let them do the "Sherlock and Watson game".  But that's a good idea about a picture since if you try to put any contact info it gets blocked.

Lee2014's picture
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   It was my aunt's idea since we were just going to try it out… Our inn name does crop up in reviews and its on our meet the host page.  

Generic's picture
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I manually adjust some rates all the time. They sell too early, I'm too cheap. Sometimes I'm proudest when my rooms are late on the market, I make more money. 

JerseyBoy's picture
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Great comments everyone.  I hope they keep coming in.   One more item I did not mention in the original post is "Are you selling through OTA's and if so are you pushing out the adjusted rates to them?"   In my case the OTA's are significant from a marketing standpoint and by this I mean they are what show up first when people are looking for hotels or any kind of lodging in our area, so having good placement on them matters.

Having said that, is using these types of pricing rules, or changes having any impact on sales through OTA's?

 

Morticia's picture
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My rates on OTA's are higher than any rate on a direct booking. Not sure that answered your question. 

Something I just found out is that lonely planet now sells rooms thru booking . com. We're a recommended property on that site so it sucks I'm now going to have to pay to be listed there. 

But, again, my rates are higher on an OTA. 

 

 

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I use ResNexus's yield management function, and have so since I switched to it. 

I have it programmed to raise my rates $10 a night when I'm 60% full, and another $10 when I get down to 2 rooms, and $10 more when I'm down to one. 

Two-thirds of my rooms are pet-friendly, and it also bumps those rates $10 when my pet-friendly rooms are 70% full

on the flip side of the coin, it's also programmed to drop my rates $10 when it's less than a week out and I'm less than 20% occupied. 

Ive occasionally set it to bump my rate for day-of reservations, but I've turned that off for now. 

One nice thing about ResNexus's reports package is that it can tell me each month how much extra money I made due to yield management.  It averages $90-140 a month depending on the season. 

its worth noting that I still get into the system and manually adjust rates based on reservations. I should let the system do it, but habits die hard. 

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JerseyBoy's picture
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Phineas,

When you indicate that your report tells you how much extra money you made and the average is $90-140 a month is this just the extra income coming from price increases?  I am wondering if it is accounting for additional booking you may be getting when you lower your rate?

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JerseyBoy wrote:

Phineas,

When you indicate that your report tells you how much extra money you made and the average is $90-140 a month is this just the extra income coming from price increases?  I am wondering if it is accounting for additional booking you may be getting when you lower your rate?

No, it has no way of knowing whether a booking came through because of the lowered rate of it they would have booked anyway. It simply shows me that I generated an extra $150 of revenue through YM rates by displaying those bookings that were at a higher (or lower) rate than the initial rate because of YM.

And to answer another question, yes, I push it through to OTAs. Although right now ResNexus has a known bug that doesn't allow it to push the higher rates to MyAllocator. I've lost a few bucks to this bug and considering how much I'm Potty Mouth (auto filter)ing about it, I expect they'll have it fixed next week just to shut me up.  

JerseyBoy's picture
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Thanks.   We are in an area with a lot of hotels and while we are not exactly comparable to a hotel, for about 60% of our business we are drawing from the same pool of customers.   While I'm not trying to be the least expensive option, I also don't want to be overpriced, particularly if we are seeing soft demand.   It makes me wonder that if during softer prices get lowered if we would not pick up some extra bookings.  

In your scenario, if demand goes up and you rent a few more rooms at $10 or $20 more and your room rate is $150 you're making and extra $30 to $60.    If another week the demand is a little lower and you lower the rates $10 or $20 and get just one booking you would not have gotten otherwise then you've made another $130-$140.  This is the way it's been explained to me, so I'm probing in here to see if there is any reality to this or if anyone even has a way to measure it directly or indirectly.

Morticia's picture
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What I think works is the guest seeing a discounted rate online. Thus the ability to show a price with an X thru it and a lower price in its place.

I'm not sure having the lowest price in a series of prices works for the best. 

It's a combination of things: 

  • Showing up at the top of a search 
  • Having the correct price for the guest 
  • Having good reviews 
  • Having a website that makes that guest want to stay 

Just having the lowest price tends to bring in guests who are only booking on price. They may not care in the least what you are offering and so may treat you and your property as the way station they think you are. 

I guess the best example is to use a hotel - the place I stayed in VT at $80/night treated me like a criminal. $80 is a cheap rate for that area. Spent $80/night in NY and was treated like an honored guest. $80 in that area is pricey. I'm not sure I made a point there. Eye-wink

I'm the first case we booked on price and location. Cheap price, good location. The second place we like the owners - not so cheap for the area, good location.

 

 

 

Lee2014's picture
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   Someone here once said, "You get what you charge." a spin off of the phase, "You get what you pay."  

JerseyBoy's picture
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Great points.   In all of this I am not suggesting to charge the lowest price, but I'm also not suggesting to charge the highest price unless it is somehow warranted because you have some kind of special amenity which has perceived value to the potential customers which they are willing to pay a little more for.    In my case if I am surrounded by a bunch of hotels, ranging from basic level economy motels, up through 5 star resorts, we will severely limit our potential customers if we do not monitor the price points of these various properties and try to keep our rates in the average of the mid level to upper level (3 -4 star) properties.    Probably about 50% of our customer base will stay with us without even looking around much.  These are regular and repeat customers who we give some preferential pricing to just out of loyalty.   The other 50% are shopping around and those are the ones I'm trying to attract.   They are the ones who may not know the difference between a B&B and a hotel or may not really care.    Using yield management and pricing strategies I guess is what I'm trying to do or think about in order to better capture new customers in this space.    Sure I wish 100% of my customer base fell into the first category, but for where I am that's not realistic so there is a degree of constant competition with the surrounding hotels.    

To Duff's point even when the surrounding hotels lower their prices we will not go below a certain level because we do not want to "get what we charge for" at the lower end of the spectrum.

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Our pricing is mid range with the other inns. In the winter we can't compete on price with hotels that charge $69. In the summer, guests will pay the Hilton $299 and argue with me over $179. It's perception. They're a real business; we're just renting spare rooms. 

I'm happy to let those folks go because they won't be happy here. 

Oddly, I just had a call for a room for this weekend. Guests were OK with a b&b or they wouldn't have called. When they found out the Hilton is 15 feet from the railroad tracks they said that sounded good to them! No accounting for what makes people happy.

 

 

Lee2014's picture
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Morticia wrote:

Oddly, I just had a call for a room for this weekend. Guests were OK with a b&b or they wouldn't have called. When they found out the Hilton is 15 feet from the railroad tracks they said that sounded good to them! No accounting for what makes people happy.

   Either they have a train track in their backyard or they never slept near one!  My parents place is half a mile from the train track and I can still here it as it goes by.  On a cloudy night it sounds like its going through the room.

Lee2014's picture
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   What is bad here is the hotels bottom out with the price in the winter to get guests to come to them.  We can't do that!  So the B&Bs end up being the highest price in winter.

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we have this with the hotel up the road - dirt cheap and all the group / on  type sites to keep staff in work and hopefully lure them into the restaurant - but with them its all extras ie parking £6, breakfast £15 and so on so is not nearly as cheap as it seems!

Lee2014's picture
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   I know… Even the OTA are putting disclaimers on the bottom about price may not include everything etc.

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PhineasSwann wrote:

on the flip side of the coin, it's also programmed to drop my rates $10 when it's less than a week out and I'm less than 20% occupied. 

Yes, I have mine set to do that too. I always notice when it does it, and think, what happened! Then remember I set it to do that. It's probably cost me $30 in the months since I started using it, but when occupancy is low just a couple of days from now, I want to attract some business, and I have to think it helps.

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Morticia's picture
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That's something else I'm looking for in my quest for a new system (even tho Gomez is not sure it's worth learning something new at this point) - I want a system that shows a price reduction right on the booking page: $179 now $159.

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RK will definitely do it AND you can customize the text that it displays:  eg:  Last Minute Savings!

You can also easily customize multitudes of system phrases.

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Res key will do that for you

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I've been using Reservation Key's Yield Management feature about a year now. I have it automatically raise the rate $10 if it's the last room available. Doesn't matter if it's 2 months before arrival, or you're arriving today, if there's only 1 room left for that date, you're going to pay $10 more than the usual rate.

Nobody has complained. I doubt many have even noticed.

On my website I list the room rate as $X and up, depending on availability, and tell them to enter their exact dates in ResKey to get the rate for the date(s) of their stay. It has worked well and put, probably, $200 extra in my pocket with no effort required on my part. That's not a lot of money, but for no effort, I can't complain!

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One of my clients uses ThinkReservations, and it adjusts prices up once the Inn gets to a certain occupancy level automatically.  She uses it all the time since moving to Think over a year ago, and particularly loves this aspect.  It's an option to turn it on, and you set the specifics - occupancy level, days in advance, rate increase.

I personally used the additional night option - we were always booked full for an annual theater festival, and I had a two-night minimum for all four weeks. I allowed guests to add a Tuesday night or Sunday night for 1/2 price.  We filled up most Sundays and about 1/2 of the Tuesdays.

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JerseyBoy wrote:

3.  Things like up-selling extra nights at a discounted rate (for example, including on a confirmation e-mail "add and extra night to your reservation and receive 10% off the entire reservation")

I'm new to online booking in general and have not used these features, but count me as interested in hearing about options and ideas that work.

We have tried to be a nice place at a reasonable rate and only rather recently tried easing rates upward a bit. I feel like my rates need to rise a bit first before offering discounts.

Ideas that would interest me:

A deal for Sunday night or a late checkout on Sunday to help sell a Friday/Saturday

A deal for a prepaid, no refund, Friday/Saturday for certain busy times where folks want to tie up a room long in advance

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I've only used it in it's simplest form. I only have 4 rooms, so if I get 3 booked, the last room gets bumped up a little. Every little bit of $ over the year adds up.

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I'm not religious about it. Example - I don't reduce rates online to pull in more bookings. I do increase rates when certain dates are filling quickly. 

The way I look at it is that the money raised with higher rates offsets any discounts repeat guests get. 

We do a 'seat of the pants' rate in the shoulder season for walk ins. It generally takes a couple of days to hit the correct 'no hassle' rate. (I don't put that rate online because it would make us the lowest priced inn in town. That raises flags with Bookers.)

 

 

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Morticia wrote:

I'm not religious about it. Example - I don't reduce rates online to pull in more bookings. I do increase rates when certain dates are filling quickly. 

The way I look at it is that the money raised with higher rates offsets any discounts repeat guests get. 

We do a 'seat of the pants' rate in the shoulder season for walk ins. It generally takes a couple of days to hit the correct 'no hassle' rate. (I don't put that rate online because it would make us the lowest priced inn in town. That raises flags with Bookers.)

 

 

Morticia, interestingly I just had this conversation with my business partner and she doesn't necessarily think having the lowest rate is a problem.   I am curious why do you think the lowest price would raise flags?   My thinking in this whole exercise is if the lower price is the right price based on market segment and demand at the time then the other inns are overpriced.   Just curious what your line of thinking is.

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JerseyBoy wrote:

 

Morticia, interestingly I just had this conversation with my business partner and she doesn't necessarily think having the lowest rate is a problem.   I am curious why do you think the lowest price would raise flags?   My thinking in this whole exercise is if the lower price is the right price based on market segment and demand at the time then the other inns are overpriced.   Just curious what your line of thinking is.

If you are not looking for lowest price as your basis for selecting a particular property and you see inn x offers pretty much what inn y offers at a $150 discount do you not ask yourself, "what's wrong with inn x?"(It probably depends on your world view - some people would ask who do they think they are at inn y?)

That's what we've heard at the door when I won't come down $50 and I take the guest to the street and point at the place that will give them a room for what they want to pay - what's wrong with that place?

If guests see the going rate for an area is no less than $150 across the board and I'm the place offering rooms at $125 (which seems to be the shoulder season rate that gets zero push back) they think there's a reason I can't GET $150.

Now, if my reviews were excellent, I could charge whatever I wanted and there'd be no questions. But I have guests who hate me so much they write new bad reviews every 6 months under new user names to keep us at the bottom of the list on TA. That does have an impact on sales and guest perceptions.

BTW, I've been inside every inn here in town that plays the same game I do. There are a couple that play by their own rules so I don't count them in my pricing. I know what you're getting at $299/night. As well as the places that are $149/night. We price ourselves based on how much grief are we willing to handle when guests just spent $99 at the beach and are now spending $100 more/night to stay here. We're not super fancy, we're pretty much laid back and not everyone wants to spend close to $200/night excluding taxes if they're not getting gold plated bath fittings. But it is what it is right here in peak season.

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Not at the top of TA's list since they began counting the quantiy of reviews as well as quality, but blessed that most reviews are good. I think that over time guests are pleased to find a nice place with a reasonable price and that works in my favor. There are places in town that I don't want to compete with, I don't want their guests, but I get a lot of nice everyday folks by being below the places that jack their rates way up.

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Ive had this before from guests " you were so cheap we thought there must be something wrong with your place, but we read the reviews and decided to chance it." you don't really want that for your place For me its first page that's fine - don't want to be in a race to the bottom as you get bottom feeders

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