Yield Management
Numericals
MEASURING YIELD
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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
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Difference between:
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Potential average double rate – Potential average single rate
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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
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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
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YIELD = Actual room revenue/Potential room revenue
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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
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This statement is possible only when the value of actual rev/potential rev is equal.
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Only if the rooms at actual rev are sold at rack rate at 100%
Actual rev/Potential rev = 600000/600000 = 1
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Occupancy % = Total rooms sold / Total no of rooms available x 100
It expresses total no. of rooms sold to the no. of rooms available
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Average Daily Rate: Room Revenue/ No of rooms sold
It expresses avg amount paid per rooms to that of total no.of rooms sold
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RevPAR = Revenue per Available Room
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There are two formulas
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RevPAR = Room Revenue/ Total rooms available
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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
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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
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Contribution margin = Room rate - Marginal cost (cleaning supplies)
YIELD MANAGEMENT SOFTWARE
Yield management software is designed to analyze the following:
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Dates of High and low demands in the hotel
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Monitor booking pattern
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Categorize information and help in forecasting
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Monitor and manage risk automatically
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Forecasting function space in the hotel (F&B)
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On to one revenue management (RevPAG)
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Calculation on FIT and group bookings
SAMPLE QUESTIONS WITH ANSWERS
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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
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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%
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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/-
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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
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One bedded room tariff Rs.3000/- when sold for single occupancy
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One bedded room tariff Rs.4000/- when sold for double occupancy
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Two bedded room tariff Rs.3500/- when sold for single occupancy
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Two bedded room tariff Rs.4500/- when sold for double occupancy
Compute the following
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Potential average single rate
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Potential average double rate
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Rate spread
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Multiple occupancy % (105 rooms out of occupied rooms are on multiple occ)
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Potential average rate
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Achievement factor and yield %
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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
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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
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3.Rate spread = Pot avg double rate – Pot avg single rate = 4,333.33- 3,333.33 = Rs 1,000
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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
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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 %