How to Identify Yield in Revenue for Your Hotel

One question every hotel manager must be having to deal with is:

How do we identify yield in revenue for our hotel?

Click to Read Tip Trailer Did You Know? Difference between Revenue and Yield to understand what yield is if you missed that.

You need to go to the heart of the revenue management system of your hotel to discover yield

Let us backtrack a bit.

Yield in Revenue - The Rack Rate 

Hotels set something called a Rack Rate for each one of their room types.

The Rack Rate is the highest non-discounted rate applicable to a particular room type.

Why is this important?

How do you relate yield to the rack rate?

Well, there are quite a few steps to be taken to achieve that.

You need information that you may not have access to unless you are the revenue manager of the hotel.

Every hotel must have a yield management system in one form or another.

What does this system do?

Potential Revenue Yield Management

Briefly stated, the Yield Management System for the hotel:

• will throw up on a daily basis as part of its reporting,
• a listing of every room that was sold according to different room types.

It will, among other things, show for each room type:

• (A) the rack rate as well as
• (B) the average of all discounted rates that were actually sold for that day.

Multiplying the rooms actually sold on that day to both “A” and “B” will give you

• Potential Room Revenue and
• Actual Room Revenue for that room type.
• The system will show % of B to A.

In other words, it will show for each room type the revenue yield formula as below.

Revenue Yield Formula

(B) Actual Room Revenue / (A) Potential Room Revenue X 100

Or

The Yield % for the revenue earned.

Note the last two words above.

This yield calculation is one type of yield known as price yield.

As you can see, yield goes far beyond revenue.

In a way, it is the measurement of the efficiency of your revenue generation.

Or in other words, your hotel yield in revenue.

And that is a critical KPI for every hotel manager.

The Full Monty

Want to read the full post on yield?

Click for full post on Yield management - Balancing Revenue, Potential, Capacity

Tip Trailers - Learn Quickly!

Tip Trailers - Learn Quickly is a series that will bring basic concepts and tips to assist a beginner hotel manager.

You will get byte sized concepts explained to you in simple, non-technical language.

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