Yield Management: What is it? Definition, Concept & Examples

In recent years, yield management has been gaining increasing popularity among businesses in the hospitality, and tourism sectors. With its use, enterprises are able to generate maximum revenues from airline tickets, hotel rooms, and many more. What is yield management, and how can it benefit your business? Keep reading!

What Is Yield Management
What Is Yield Management? Definition, Concept & Examples

What is yield management?

In a nutshell, yield management can be defined as a selling strategy based on offering products. Selling services to the right customers, for the right price, at the right time.

Thanks to it, companies can maximize their revenues, as they offer fixed resources like hotel rooms, or airline seats at different prices, determined by a number of factors such as the time of the year, or the demand.

Consequently, two customers can book room hotels of the same standard, and pay completely different amounts due to the number of variables present at the moment of finalizing transactions.

2 examples of yield management

If you’re having a hard time understanding what yield management is, try to imagine the following situations:

  • You are a hotel owner, and you know there is an important football tournament in the city next year. Since you are located close to the stadium. You decide to increase the prices of your rooms for the duration of the tournament. As a consequence, people who want to see the matches have to pay more or book rooms that are far away from the destination. Which means a long and uncomfortable commute.
  • You are a restaurant owner, and you have noticed that not many people dine at your place on Tuesdays, and Thursdays, therefore, you decided to introduce special cocktail discounts that are supposed to attract customers and encourage them to select meals from your menu.

These two examples of yield management show how proper, data-driven decision-making can help you tailor your offer to the demand, and customer expectations to boost your business results.

The takeaway

It is a useful technique that allows companies to grow and optimize their results. It’s a great recipe for understanding customers’ preferences and learning how to devise a variable pricing strategy. That takes into account various external factors.

If you don’t feel that yield management is your cup of tea, you can always choose professional services offered by external companies that will help you reach your goals.

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