Yield Management and Rate Plans Overview

RDP’s yield management system is included as a core module with all RDP software systems.

YieldMgmtGHistory

When combined with a careful study of the property’s occupancy history and the training of employees, yield management can significantly increase occupancy, average daily rate (ADR) and revenue per available room (REVPAR). Small increases in ADR can drastically increase property profit and value. For example, a 100 room hotel with an ADR of $70.00 grosses $2,555,000 in a year at 100% occupancy. With an ADR of $80.00, the same hotel will gross $2,920,000 an increase of $365,000!

Topics Covered Include:

Yield Management Modes

The RDP yield management system can be used in a variety of different ways, including:

Highest to Lowest

In “highest to lowest” mode, the system displays multiple rates for each day of the guest’s stay, from the highest rate to the lowest rate.  The idea is to train the reservation to attempt to sell the highest rate first, then the next highest, etc.

Rack Rate $80.00
Corporate Rate $75.00
Frequent Flyer $70.00
AAA $65.00

Highest to Lowest with Cutoffs

In “highest to lowest” mode, management can establish cutoff levels for rate plans for each day of the year.  In the example below, the Frequent flyer and AAA rate are cutoff, which only allows the reservationist to sell the Rack or Corporate rate for this particular day.

Rack Rate $80.00
Corporate Rate $75.00
Frequent Flyer Cutoff
AAA Cutoff

Lowest Available Rate

In “Lowest Available rate” mode the system only shows one rate for each day, which is the lowest available rate.  This rate may be different for each day.   In the example below, a three day reservation has three different rates, each of which is the lowest available for that day.

This mode is useful in highly competitive environments where it is necessary to “match rates” with other nearby properties.

Wednesday, 8/24/16 Thursday, 8/25/16 Friday, 8/26/16
Rate Plan RACK AAA Corporate
Rate $80.00 $55.00 $70.00

Best Available Rate

“Best Available” rates are often used in highly competitive markets where you want to offer the guest the best rate for each day FIRST, not the highest rate first.  The concept of “Best Available Rate” is to establish the best rate plan a guest can get for each day in the future.  The system them always uses that rate plan for that day.  All the reservationist has to do is select the “LOW1” controlling rate plan and the system will automatically fill in the rate plans above.

Date Best Rate Plan Rate
3/1 FLYR 65.00
3/2 10DC 90
3/3 20DC 80.00
3/4 3AAA 90.00
3/5 20DC 80.00

One Rate Only

The RDP yield management system can be “turned off” and only show one rate plan, “Rack” for all days.

Seasonal Rate Changes

Most properties offer different rates for different seasons.   Features include:

  • 52 different seasons allowed
  • Every unit type or unit number can have a different rate for each season
  • Each rate plan (Rack, AAA, etc) can have different seasons and rates
  • Seasonal rates can be established up to four years in the future
  • Each day of the year can be in a different “season”
  • System tables can be quickly changed
  • Rate calculation extremely fast (less than 1 second) during reservation process
Seasonal Rates for Unit type = King Low Season Med Season High Season
Rack Rate 80.00 120.00 170.00
Corporate 75.00 110.00 160.00
Frequent Flier 70.00 102.00 150.00
AAA Discount 65.00 90.00 140.00

 

Seasonal Rates for Unit type = Double Low Season Med Season High Season
Rack Rate 92.00 132.00 182.00
Corporate 87.00 122.00 172.00
Frequent Flier 82.00 114.00 162.00
AAA Discount 77.00 102.50 152.50

Automatic Cutoffs for Each Season

An automatic cut-off level can be established for each rate plan for every day of the year.  Many RDP properties study the past history of the property to determine cutoffs.  In periods of historical greater occupancy the rack rate is increased and the discount rates are cut-off.

RDP allows up to 9999 different rate plans, each with a different cutoff for each day of the year.  The table below shows cutoffs for four rate plans for three days.  In this example, the rate plan “corporate” is cutoff for 7/2/2016.

Cutoff By Rate Plan 7/1/2016 7/2/2016 7/3/2016
Rack Rate Available Available Available
Corporate Available Cutoff Available
Frequent Flier Available Cutoff Cutoff
AAA Discount Available Cutoff Cutoff

Cutoffs can be based on occupancy percentage.  In the example below the AAA rate plan is cutoff at 50% on 7/1/2016.  This means when occupancy is less than 50% the rate plan will show as available for 7/1/2016.  When projected occupancy is greater than 50% the rate will not show as “cutoff” to the reservation department.  The rate plan “AAA” is set at “0%” for 7/3/2016.  This means the AAA will always show as “cutoff” to the reservation department for this day.

Cutoff By Rate Plan using Occupancy % 7/1/2016 7/2/2016 7/3/2016
Rack Rate 100% 100% 100%
Corporate 90% 75% 0%
Frequent Flier 80% 60% 0%
AAA Discount 50% 40% 0%

Rate Plans for Groups and Wholesalers

Yield management allows unique rate plans to be established for groups, companies, wholesalers, and net rate travel agents. All reservations for these entities then use the unique rate assigned. This allows reservationists to book reservations quickly with the correct rate and without referring to hand-written tables.

Group Rate Plan Rate for
Low Season
Rate for
Med Season
Rate for
High Season
Misc
IBM Group $90 $100 $120 52 Seasons
CISCO AAA $80 $90 $110 Over 999999 groups
MICROSOFT Flat75 $75 $75 $75 Wholesalers
FORD AAA $80 $90 $110 Net Rate Agents

In the example above, Cisco and Ford both use the “AAA” rate.  IBM uses the “group” rate, while Microsoft uses a unique rate plan set up just for them.  Notice that “flat rates” can be used.  In the example above Microsoft has a flat rate of $75/day, regardless of what room type or season is selected.

Adjusting Yield Management

Most customers use the yield management module to establish rate plan cutoffs well in the future.  For example they may establish the seasonal rates and cutoffs for the summer during a meeting in January.  However these future settings are usually only a “best guess” of what rates to offer on each summer day.

To maximize the benefit of RDP yield management, rates and cutoffs must be reviewed frequently.  For example, your property may have always sold out on the July 4th weekend, and as a result the only available rate is “rack”, and it is set very high. However, as the 4th of July approaches it is critical to monitor actual bookings and make adjustments to available rates based on actual bookings.

RDP offers a wide variety of reports to show projected occupancy, including comparisons to the projected occupancy at the same point in time the previous year. (see “enhanced forecasting“).  Using these reports the rates and cutoffs can be adjusted to maximize occupancy.

One RDP customer has a large airport hotel. On a given day they may have projected only 50% occupancy and therefore have many discount plans available on the yield management screen. However, fog moves into the area and flights are starting to be canceled. The yield manager at the hotel eliminates all discount rates for that day. Several hours later the fog lifts and the airport is fully operational, so the yield manager re-opens the discount plans.

This particular customer specializes in purchasing properties with a low occupancy and ADR. With careful study of the property’s history and RDP’s yield management, both occupancy and ADR are increased and the property is sold at a significant profit in a few years!

Please also review the Rates and Packages.

About Us

Resort Data Processing (RDP) is a Property Manage Software company founded in 1981 and headquartered in Vail, CO. Our objective is to provide more powerful software for clients who have outgrown their current system.

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