YIELD MANAGEMENT & MARKET INDEXING

Understanding
YIELD MANAGEMENT & MARKET INDEXING

YIELD MANAGEMENT

YIELD – Historic of Silent Revolution

What’s Hotel YIELD MANAGEMENT?

MARKET INDEXING
A Unique Approach on Market Analysis

HOW DOES HOTEL MEASURE UP?

Base Measurement (early ‘80s)

Occupancy (%)

Average Room Rate (ARR)

Developed Measurement (late ‘90s)

Revenue per Available Rooms (RevPAR)

Market Share - the number of rooms in a hotel as a percentage of the rooms in the hotel’s competitive market set.

Market Set - the total number of rooms the hotel is in direct competition with, within its area’s market and/or segment, class/star, etc.

                SWOT analysis must be conducted prior determining Market Set.

                The ratio between the Total Rooms Occupied in the hotel against the Total Rooms Occupied collectively attributed to the hotel’s Market Set. 

                Hotel must strive to be equal to or better than the competitors. Market Penetration must be at least 100%, and to be the leader in the Market Set, well over 100%. 

                The accuracy of previous analysis measurement tools is not sufficient enough to determine the success of a hotel. Therefore, some developed approaches are established.

Market Penetration Index (MPI)

Average Rate Index (ARI)

Revenue Generated Index (RGI)

    Formula:

      Hotel’s Occupancy (%)

      Market Set’s Occ. (%)

 

Analysis:

  If = 1, means hotel is on par w/ other competitors

  If < 1, means loss some of the market

  If > 1, means hotel can grab other hotel’s market

Formula:

Hotel’s Average Room Rate (ARR)

    Market Set’s Average Room Rate (ARR)

Analysis:

If = 1, means the hotel sells at the right price

If < 1, means the hotel undercuts price

If > 1, means the hotel sells above market price

Formula:

                        Hotel’s RevPAR

                    Market Set’s RevPAR

Analysis

If = 1, means the hotel gains its revenue share

If < 1, means the hotel losses its revenue share

If > 1, means the hotel penetrates other rev share

If a hotel experiences the index as follows:

                MPI – Leader

                ARI – Less than 1

                RGI – No. 2 or 3 in the Market Set

                It means the hotel sells with occupancy oriented strategy by lowering the room rates. Revenue is not optimized.

If a hotel experiences the index as follows:

                MPI – No. 2 or 3 in the Market Set

                ARI – Leader

                RGI – No. 2 or 3 in the Market Set

                It means the hotel sells less rooms due to the room rate is not competitive nor absorbed by the market. Revenue is not optimized.

If a hotel experiences the index as follows:

                MPI – Leader

                ARI – Equals 1

                RGI – Leader

                It means the hotel sells on the right market at the right price which resulting an optimized revenue for the hotel.