Yield Management Used in Hotels

Subject: Employee Management
Pages: 8
Words: 2255
Reading time:
10 min
Study level: College

Human resource in yield management

In the implementation of the yield management (YM), human resources remain a very critical factor in achieving positive results from the system. According to Yeoman (1996), the yield management system is functionless without the human activities. Yeoman and Watson (1997) echoed this opinion after a further research on the contribution of human resources. However, the team working with the employees remained the fundamental factor in determining the results from human activity. Daigle and Richard (2000) had similar perspective in which they linked relational approach YM system in hotels to human factor.

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Hendler and Hendler (2004) linked the success in operating the YM software to expertise among the managers and employees. Therefore, managers, and employees should be knowledgeable for the success of YM in hotels. This will be in the perspective of decision-making in the hotels in which human activities and decision may pose the hotel to risks or productive decisions. They emphasized that availability of YM system should not influence manager’s decision but a facilitative tool to YM system. Use of reliable information in the hotel industry databases was crucial among the managers to help them predict demand changes among the customers (Choi, & Cho, 2000).

Nevertheless, human resources management (HRM) remains very critical factor based on the statement “Our people are our most important asset” (Nickson, 1999, p. 203). Therefore, it becomes inseparable to the success of hotel industry under condition that HRM effectively enhance various activities geared to strengthening the managers and employees. As a result, evolution of yield culture has been significant in implementation of YM by creating an understanding on the functioning of YM in the hotels (Jones & Hamilton, 1992).

Donaghy, McMahon and McDowell (1995) disputed the overreliance of YM software in hotel by pointing that humans are capable of running an effective YM even without Artificial Intelligence (AI). Conversely, AI cannot succeed without human factor. Therefore, hotels should not concentrate more on computerized YM because they have adverse effects on human factor through deskilling of the staff (Kimes, 1989).

Developing and understanding yield management

Occurrence of risks in hotel industry has led to development of YM system to curb loses. Perishability of hotel services raises the concern on how best to get customers to use their services to maximise revenues (Brothertoon, & Turner, 2001).

Change in demand and supply of hotel services depends on various factors, such as weather, level of incomes, and the service, or products offered to customers. This leads to uncertainties in future of hotel industry because they may not adequately determine the number of customers demanding their services in future. The number may be overwhelming or sometimes very low to an extent that hotels may decide to offer discounts to their customers.

However when customers increase, hotels have many options of booking the customers based on various factors, such as the past records, the reason the customer want the service, and length of staying in the hotel among others. Therefore, wise decision-making remains fundamental in the hotel industry to come up with a system to eliminate these risks of either booking or overbooking (Choi, & Cho, 2000).

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Knowledge of market situations in terms of demand, supply, competition, technology, customers, and human resources will be very crucial in the development of YM system. Future figures cannot guarantee the extension of past and present situation. There are possibilities that there will be changes that may affect the business activities in the hotel industry. Therefore, plans, and strategies focused in hotels against their competitors will shape the supply level. On the other hand, human factor could be a factor in consideration in shaping the demand for services in the hotels (Brothertoon, & Turner, 2001).

The presence of computer-generated forecast cannot guarantee fully the possibilities of the hotel future in terms of demand and supply. Therefore, the management team must be the last resort in the forecasted figures generated from the computers. In addition, the relevance of the forecasted figures will further require the contributions of the staff members holding different levels in the hotel (Jones, 1999). Therefore, people in the hotel function have role to play in the development and implementation of the YM hence their inputs are vital in the development of the YM system.

Yield management development starts with the development of yield culture geared toward familiarizing their management team and employees on the functioning of the YM system phenomenon. Various factors to consider in this stage could be delegation of people to take charge of the system after adoption in the hotel. This will ensure adherence to the requirements as well as advocating for proper working environment with adequate supervision and enhancement of the employees (Donaghy, 1996). Therefore, this stage will be very significant in familiarizing the human factor the components and aspects of Yield management.

There must be a favourable working condition to ensure execution of duties as directed by the management team to the employees. In addition, the selected personnel should exhibit knowledge in analysis and proficiency in working with computer, especially in information technology. The decision making phase should include the members at all levels to ensure the viability of the YM system. The major focus at this stage will be to devise means to increase revenue to the organization, and the contribution, and participation of the employees and managers (Jones & Hamilton, 1992).

The next step could be the cultivation and enhancement of yield strategy (Gamble, 1990). YM system should focus on the goals set by the hotel toward the performance against their competitors. The focus at this phase will be how the hotel can increase their sales and the methods they prefer the best in booking their customers. The vital information required in this phase will be the analysis on the market situation based on the database information to project future level of customers.

This will evaluate the discounting procedures to decide when to offer or withdraw discounts to customers. In addition, the yield strategy will determine when to raise the booking fee, depending of the prevailing conditions such as, the group booking, length of staying, and reason for booking (hotels prefer events holdings because they generate more revenues). The yield strategy will help the company to offer the most competitive service to their customer to create the customer loyalty and satisfaction. Therefore, yield management performance criteria could determine the effectiveness of the YM system in the organization through making the wise decisions on making or canceling reservations without incurring losses in the hotel.

The next process will be the inclusion forecasting, and YM personnel requirement in job descriptions of the hotel. This will incorporate the professional requirement among the employees and managers toward the implementation of YM system. In addition, they will have information on how to operate the system based on the knowledge to interpret and analysis of the results produced by the system to make the best decision.

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The development of this system cannot be effective without setting up a forecasting committee constituted by managers from various hotels’ divisions. The most affected divisions in the hotels by the YM system are “reservation, sales, marketing, food and beverages, banqueting, and the front office” (Huyton & Peters, 1997, p. 211). The committees will have the mandate to ensure perfect coordination among these divisions for best results.

Therefore, this phase will have to ensure high level of customer satisfaction through offering services recommended by the hotel. In addition, the committee will have to ensure the employees’ well being to motivate them in their duties for better service delivery. This will in turn increase the number of customers from their competitors. At that point, the hotel has many options in rejecting or accepting reservations because the demand is higher than the number of rooms.

The final development phase of the yield management system will incorporate the modification of the employees’ remuneration based on the goal to improve the operating performance resulting from the yield management. As earlier noted, the human factor is the determinant in the demand of the services offered by the hotels. Therefore, the employees have the willingness in their duty to deliver the best inputs to the implementation of the YM system. This will be through increase of the remunerations in which the hardworking employees may get reward or a token of appreciation. As a result, the hotel will be in a position to offer high quality service than their competitors hence increasing its revenues.

The yield management team

Yield management can also mean revenue management hence; this study may use literature on revenue management team as cited by various researchers (Guilloux, & Beluze, 2002; Schwartz, & Cohen, 2004). The implementation of YM requires a strong yield management team. This should be first priority before even the setting up of the yield management system to ensure the effectiveness of the system. Formation of this team will be the major driving force to ensure the implementation and success of the system through regular meetings held to forecast business activities in the hotel.

Coordination among various departments and managers remains the challenging factor in the success of YM system. Therefore, the yield management team must comprise of goal-oriented individuals, and can reach a conclusive decision-making geared toward increasing the revenue. According to Kimes (1989), the shortage in the revenue managers in the current hotel industry poses a challenge, as hotel owner may fear future problems in revenue management.

The challenges have been as a result of global economic changes, competitiveness, and pressure mounted by the hotel owners to cut down costs. As a result, any revenue manager eying competence in this field should exhibit high skills in analysis, leadership, negotiation, and communication. Revenue managers are major contributors to the success and holistic process of yield management system (Crystal, 2007).

Members of the yield management team and their roles

Various people from various hotel divisions constitute the yield management team. They include the “room division manager, the sales manager, and reservation manager” (Huyton, & Peters, 1997, p. 210). This does not limit the contribution of other managers, and employees, but the team has few individuals to enhance a speedier decision-making in the hotels. Sometimes, the team may involve general manager in the hotel, whereas the front office manager may replace the reservation manager in the team.

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Nevertheless, the first three managers mainly constitute most of the YM teams in many hotels. The major role of the room manager in the team is to control the room allocation with aim to maximize the occupancy and revenue generated from these rooms. On the other hand, the sales manager’s role in the team is mainly on daily basis sales of hotel bedrooms. This department (sales) considers the need to maximize revenue hence it ensure people visit the hotel rooms at the highest number possible (Yeoman, & Ingold, 1997).

There is a close connection between the sales and marketing departments to keep the marketing team well informed on the time when the hotel business is booming or very low. Last but not the least is the reservations manager who oversee the bookings in the hotel as well as handling future bookings and keeping the details on the past arrivals and occupants in the hotel. This contributes much in the forecasting on demand.

The functions of the yield management team

This team has a vital role to play in the success of YM system and decision making among the members in the team should be consultative among the members. Therefore, the functions of this team include forecasting the demand, making management decisions in room allocations, deciding the rates to the customers, and conducting feedback sessions (Huyton & Peters, 1997).

To start with, demand forecasting/prediction form the basis of this team given that the goal of the YM system is to increase revenues in the hotel. The role of the team to foresee the future demand on the room could be challenging because the past figures may not fully generate the true percentages on the future demands on the rooms. Various questions are evident in the attempt to understand how to plan for maximum yields in the hotel. The major concern remains on how the hotel can come up with a preferred market mix of the targeted group segment (Orkin, 1988).

Therefore, these decisions on demand prediction will have to revisit some previous trends in the market to result to some conclusion of the future expectations in the market. This will go hand-in-hand with consideration of future occurrences that could influence positively or negatively the booking of the hotel rooms. Therefore, the reservation department must consider these when as assigning the rooms. In addition, the decisions on the favourable rates on the booked rooms will have to consider these changes in the market (Brotherton, & Mooney, 1992).

However, the team will have to consider the demands of these rooms before the final rates are set. Last, the team must reflect on the functioning of the YM system to analyse and enhance possible changes to improve the level of revenue generation in the organization (Cross, 1998). This emanates from the customers’ comments or suggestions made during they stay in the hotel. The room manager must have updated information on the previous bookings to ensure good decision in overbooking policy. This will be very important to ensure that booking with aim of increasing revenues instead of increasing occupancy (Badinelli, 2000). This could offer source for probable changes to make changes that eventually will make the system more profitable with decisions made by the team.

References

Badinelli, R.D. (2000). An Optimal Dynamic Policy for Hotel Yield Management. European Journal of Operational Research, 121, 476-503.

Brotherton, B., & Mooney, S. (1992). Yield Management–Progress and Prospects. International Journal of Hospitality Management, 11(1), 23-32.

Brothertoon, B., & Turner, R. (2001). Introducing Yield Management System in Hotels: Getting the Technical /Human Balance Right. Journal of Service Research, 1(2), 25-47.

Choi, T., & Cho, V. (2000). Towards a knowledge discovery framework for yield management in the Hong Kong hotel industry. International Journal of Hospitality Management, 19, 17–31.

Cross, R.G. (1998). La Tarification Flexible. Les Editions d’Organisation, p.216.

Crystal, C.R. (2007). Revenue Management Performance Drivers: An Empirical Analysis of the Hotel Industry, School of Georgia Tech College of Management. Georgia: Georgia Institute of Technology.

Daigle, A., & Richard, L. (2000). L’approche relationnelle dans le secteur hôtelier, une étude exploratoire. 16th congrès international de l’Association Française du Marketing, Montréal, Canada.

Donaghy, K., McMahon, U., & McDowell, D. (1995). Yield Management: An Overview. International Journal of Hospitality Management, 14(2), 139-150.

Donaghy, K. (1996). An investigation of the awareness, current impact and potential implications of YM among hotel managers. Sandra Moffat: DPhil Thesis, University of Ulster.

Gamble, P.R. (1990). Building a yield management system, the flip side. Hospitality Research Journal, 14(2), 11-21.

Guilloux, V., & Beluze, G. (2002). Revenue Management par Place: une Spécificité Accor. Decisions Marketing, 26, 7-15.

Hendler, R., & Hendler, F. (2004). Revenue Management in fabulous Las Vegas: Combining customer relationship management and revenue management to maximize profitability, Journal of Revenue and Pricing Management, 3(1), 73-79.

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Nickson, D.P. (1999). Human Resource Management in Hotel Accommodation Services. In S. Constantinos & R.C. Wood (Eds.), Accommodation Management Perspectives from the International Hotel Industry (pp.203-230). London: International Thomson Business Press.

Orkin, R. (1988). The impact of revenue management decisions on customers. Thousand Oaks: sage publications.

Schwartz, Z., & Cohen, E. (2004), Hotel Revenue Management Forecasting: Evidence of Expert-judgment Bias. Cornell Hotel and Restaurant Administration Quarterly, 45(1), 85-98.

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Yeoman, I.S. (1996). A Conceptual Model of Yield Management. (Unpublished Paper Napier University Edinburgh). Napier University, Edinburgh, UK.