The term "Yield Management" has been coined in the airline industry and its objective is to manage the product inventory (seats on a given flight, rooms for a given night), in such a way as to maximise revenue. 

In the airline context, "Yield" is expressed in cents per passenger mile, which is not a very appropriate definition to be used for non-airline market participants.

Translated into he hotel situation, "Yield" would be defined by $s per guest room rental time (night, hours, minutes) by room type, comparable to the retail definition of $s per square metre per time period.

Yield Management should rather be called Revenue Management or Inventory control, since it is revenue yield to be maximised. Yield or Revenue Management is not really new to Hoteliers, since identical rooms have been sold for higher prices during high season and for lower prices during low season and weekends for generations. This was done by more or less experienced staff with varying talent to anticipate overall demand at certain days, weeks or periods of the year for a limited supply of rooms.
Yield Management (or Revenue Management) is an economic discipline appropriate specifically to hotels, but also to many sectors of the service industry, selling perishable products.
"Market Segment Pricing" (price differentiation) is combined with statistical analyses to expand the market for the service and increase the revenue "yield" per available unit of capacity.
It is a set of demand forecasting techniques, optimisation models, and implementation procedures which collectively determine which reservation requests to accept and which to reject in order to maximise revenue.
A number of academics define "Yield" as the product of occupancy and "Price Efficiency". Price Efficiency is defined by dividing the average rate sold by the rack rate.
Rack rate: $ 200
Occupancy: % 50
Achieved average rate: $ 100
Y = 50/100 x 100/200 = 25%
Maximum Yield is reached, when 100% of capacity is sold at rack rate:
Y - 100/100 x 200/200 = 100%
In view of Yield Management objectives, hotels should not focus on occupancy versus ADR, but rather look at the "true" YIELD, i.e.
Average revenue per room sold neither takes unsold rooms into account nor changes in room supply (renovations, new construction) nor does it tell management, whether it is making or loosing money.
Average cost per available room per period can then easily be compared with average yield per room (REVPAR) per period and thus profit (margin) or loss per available room per period. It can be further refined into REVPASQM2 and a host of other formulae.

Why this tool?
Most businesses are looking constantly for those companies that will provide a constant base of trading throughout the year. In order to secure that business or commitment special rates are required. How do you know that the business is right for your company? How do you know that the rate is right and you are not missing out? Getting it wrong means that for the next 12 month you could be losing bottom line profit and you miss out on signing up a better company. Getting it right means a lot and could help your company grow and re-invest. It could also mean that the following negotiations are much easier than trying to rectify previous errors. Companies do change their expenditure and travel policy more than you think and each account should be re-visited and analysed on a annual or bi-annual basis. The statement that a large account equals greater discount is simply untrue and could leave a company in a low bottom line profit. The tool you are about to use will highlight the following : 
• Hidden costs of the Account (are GDS fees, commission, free services, included) 
• Displacement (what is the Account’s stay pattern .. do they stay when we least or most
   need them) 
• Spending profitability (pay high room rate but no extras?)

The understated importance 
of yield management
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