Yield Management

Numericals

MEASURING YIELD

FORMULA 1:

Pot avg single rate = Single occ room revenue / No of rooms sold as single

                                                         

FORMULA 2:

Pot avg double rate = Double occ room  rev/ No of rooms sold as double

                                                                         

FORMULA 3:

Multiple occ % = No of rooms sold on multiple occ / No of occupied rooms x 100

                                                              

 

FORMULA 4:
RATE SPREAD

Difference between:

Potential average double rate – Potential average single rate

Higher the rate spread customer has less choice to take higher price rooms and upgrade

 

FORMULA 5:

Potential average rate = (Multiple occupancy percentage x rate spread ) + potential avg single rate

FORMULA 6:

Achievement factor= Actual Average room rate (ARR) /Potential avg room rate  (PAR)

 

 

FORMULA 7:
MEASURING YIELD

YIELD is expressed as the ratio of  = Actual room revenue/  Potential room revenue

                                   

YIELD %  = Actual room revenue / Potential room revenue x   100

YIELD =  Actual room revenue/Potential room revenue

YIELD = Total rooms sold/ Total available rooms  x Actual avg room rate(ARR)/ Potential avg room rate

             

YIELD = Occupancy percentage x  Achievement factor

 

NOTE: Maximum value of yield is 1

  • This statement is possible only when the value of actual rev/potential rev is equal.

  • Only if the rooms at actual rev are sold at rack rate at 100%

Actual rev/Potential rev  =   600000/600000 =    1

       

  • Occupancy % = Total rooms sold / Total no of rooms available x   100

                            

 It expresses total no. of rooms sold  to the no. of rooms available

  • Average Daily Rate: Room Revenue/ No of rooms sold

                                                  

   It expresses avg  amount paid per rooms to  that of total no.of rooms sold

 

  • RevPAR = Revenue per Available Room

 There are two formulas

  •         RevPAR = Room Revenue/ Total rooms available

                                  

  •       RevPAR = ADR X  Occupancy %

 

WHY RevPAR?

Best measurement for maximizing room revenue as it identifies hotels occupancy percentage  and ADR  together, they challenge hoteliers to maximize occupancy and room rates.   

 

IDENTICAL YIELDS

If combination of Occupancy percentage and Average room rate results in equivalent revenue or equal yields

 

Identical yield occupancy %

Identical yield occ % = Current occ% x Current rate/ Proposed rate

EQUIVALENT OCCUPANCY

It is the occupancy percentage that a hotel has to achieve if the hotel plans to change it ARR (higher or lower )

It evaluates whether the change in ARR is justified  or not.

 

Equivalent Occ% = Current occ% x Current contribution margin/  New contribution margin

Contribution margin =  Room rate - Marginal cost  (cleaning supplies)

 

YIELD MANAGEMENT SOFTWARE

Yield management software is designed to analyze the following:

  1. Dates of High and low demands in  the hotel

  2. Monitor booking pattern

  3. Categorize information and help in forecasting

  4. Monitor and manage risk automatically

  5. Forecasting function space in the hotel (F&B)

  6. On to one revenue management (RevPAG)

  7. Calculation on FIT and group bookings

 

 

SAMPLE QUESTIONS WITH ANSWERS

Q1. Front office manager of Taj view hotel has   received the daily report with the following data.

Total rooms =  300

Rooms sold =  240

Rack rate     = 2000/-

85 rooms sold @ Rs 1,500/-

65 rooms sold @ Rs 1,000/-

90 rooms sold @ Rs 900/-

 

Determine the yield and yield %

 

Solution

Yield = actual rev/ potential rev

Actual rev=85 x 1500+ 65 x 1000+ 90 x 900=273500

Potential rev =  300 x 2000 = 600000

Yield =  273500/ 600000 = .45

Yield %= .45x100 =  45%

 

Q2.  Front office manager of Hotel Retreat has the following information from his daily report.

Total rooms =350

Occupancy= 80%

Rack rate = Rs.3000/-

125 rooms sold @ Rs.2700/-

100 rooms sold @ Rs.2500/-

55 rooms sold   @ Rs.2000/-

Determine yield %

 

Soln 2.

Actual rev =125 x 2700 + 100 x 2500 + 55 x 2000 = 697500

Potential rev = 350 x 3000 = 1050000

Yield =  697500/1050000 = .66

             

Yield %  = 66%

Higher the yield % better the performance

 

Q3. A 300 room hotel with Rs 1000/- as rack rate sells 200  rooms at an average rate of Rs.800/-

Calculate yield.

ANSWERE: 53%

Q4. A 300 room Casa Vana Inn sells rooms for a total of Rs 5,25,000/-.What is the hotels revenue per available room ?

ANSWERE: 1750/-

 

Q5. A 100 room hotel sold

30 rooms at Rs.40

30 rooms at Rs.50

30 rooms at Rs.60

What is hotels revPAR ?

ANSWER: 45/-

Soln 5. II method

Rev PAR= ADR x Occupancy %

Average daily rate = Total room rev =  4500 = 50

No of rooms sold =   90

Occ % = No of rooms sold/No of rooms available = 90/100  = .9

RevPAR = 50 x .9 = 45

 

 

Q6. Hotel Retreat  has 300 guestrooms and collects an average of Rs.2000/- per room and is operating at 70% average occupancy. the hotel offers 100 one bedded and 200 two bedded room. The rates for  the rooms are

  1. One bedded room tariff Rs.3000/- when sold for single occupancy

  2. One bedded room tariff Rs.4000/- when sold for double occupancy

  3. Two bedded room tariff Rs.3500/- when sold for single occupancy

  4. Two  bedded room tariff Rs.4500/- when sold for double occupancy

 Compute the following

  1. Potential average single rate

  2. Potential average double rate

  3. Rate spread

  4. Multiple occupancy % (105 rooms out of occupied rooms are on multiple occ)

  5. Potential average rate

  6. Achievement factor and yield %

SOLUTIONS:-

 

1.Potential avg single rate = Single occ room revenue/ No of rooms sold as single

Potential rev at 100% occ = (100 x 3000) + (200 x 3500) = 10,00,000

Potential avg single rate= 10,00,000 /300 = Rs. 3333.33

2.Potential avg double rate = Double occ room revenue/ No of rooms sold as double = (100 x 4000) + (200 x 4500) =13,00000

Potential avg double rate = 13,00000 / 300 = Rs. 4333.33

3.Rate spread =  Pot avg double rate – Pot avg single rate = 4,333.33- 3,333.33 =  Rs 1,000

4. Multiple Occ % = No of rooms sold on multiple occ/ No of occupied rooms  x 100

No.of rooms occupied= 70/100 x 300 = 210 rooms

Multiple Occ %  = 105/210 x 100 = 50%

         

 

5. Potential avg room rate = Multiple occ% x Rate spread +Potential avg single rate

 = 50/100 x 1000 + 3333.33 =  500 + 3333.33 = Rs. 3833.33

6. Achievement factor = Actual avg room rate (ARR)/ Potential avg room rate = 2000/3833.33  

= .522 or 52%

 

7. Yield = Occ % x Achievement  factor = 70/100 x 52/100 =  36.40 %

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