Dear WuBookers, you have probably already heard of yield management, a very common practice in the industry, yet often confused with another equally common strategy, revenue management. In this article, we will try to clarify the main differences between the two, to better understand what yield management is and why dedicated software is essential to manage it effectively.

What is yield management in the hotel industry?

“Yield” is equivalent to “return”, so yield management literally means return management.

It is a technique for maximizing profits that has been used since the ‘70s by American airlines to optimize fixed costs. An airplane flies with either 50% or 100% of its passengers: by creating flexible sales rules that allow all seats to be filled (even at reduced prices), fixed costs are lowered and revenues are increased.

The same example can also be applied to a hotel or B&B. Yield management is, in fact, a pricing strategy that allows you to vary your offer to achieve the highest possible margin.

The yield management formula

Like other KPIs essential for hotels, yield management is also calculated using a mathematical formula:

Yield = Revenue generated / Maximum potential revenue x 100

Let’s take an example. The “John Tourism Boutique Hotel” has 10 rooms and, in high season, charges an average daily rate (ADR) of 150 euros. The maximum potential daily revenue is therefore: 10 x 150 € = 1,500 €.

On a given night, the hotel manages to sell 7 rooms, generating a turnover of:

7 x €150 = €1,050.

The yield will therefore be: (€1,050 / €1,500) x 100 = 70%.

Measuring yield allows you to evaluate the hotel’s performance and make strategic changes to the pricing plan, taking into account a number of key factors.

Variables to consider when forecasting demand

Yield management is based on a number of variable factors that influence demand and subsequently affect sales and revenue:

• Seasonality: the number of reservations varies greatly depending on the season. So it’s important to know which periods have the highest and lowest influx of guests in order to predict demand;
• trends and events: trends and the calendar of events in the area are also factors to consider. The former include, for example, recent experiences of regenerative tourism or the evergreen food and wine tourism, which attract travelers to certain places and solutions. The same is true for cultural events and commercial initiatives that are highly appealing;
• types of guests: not all guests are the same. Business travelers are usually less price-sensitive, stay for shorter periods, and book less in advance than leisure travelers.
• competition: the rest of the market also influences occupancy. The more saturated a destination is with supply, the more difficult it will be to gain the trust of customers.

Faced with such a complex picture, the sector has equipped itself to further refine its analytical and forecasting tools, especially for larger and more structured businesses.

Yield and revenue management: what are the differences  ?

Over time, the concept of yield management has evolved into what is now the more sophisticated revenue management.

Revenue management considers a wide range of metrics: market trends, competitor prices, audience segments, and much more. Revenue management is not limited to room prices, but also relates to “extras,” such as additional services or special options (special rates and agreements for tours and experiences, discounted access to the spa, extra cleaning, and so on).

In larger organizations, the Revenue Manager uses specific systems (RMS) to make accurate forecasts of demand and revenue (hotel forecasting) and update the offer dynamically.

Yield management, on the other hand, focuses on inventory management, i.e., the finite number of rooms, and seeks to sell them at the best possible price in a given period of time to maximize profit. We can say that this is a more simplified form of revenue management, particularly suitable for medium or small establishments that want to optimize their profits based on their own experience.

By analyzing the data, it is possible to develop diversified and variable sales rules, which can also be tested with the help of a yield manager software integrated with the PMS.

Yield Manager software for hotels: what it is and how it works Zak by WuBook

Zak, the PMS for hotels by WuBook, also includes an automated rate control system. Thanks to the Yield Manager module, it is possible to increase or decrease room prices across all sales channels, based on how availability and reservations received vary.

This is a very powerful tool that can be configured in a highly flexible manner: rules can be applied to a single room (the product) or to all rooms, and can be diversified and customized.

What parameters can you modify to create your own rules with Zak

There are many conditions you can decide to apply to create price variation rules on Zak. After naming the rule (for example, “Christmas 2025,” visible only to you), you can intervene on:

• the rate (or rates) on which the rule will act;
• the product (one or more, of your choice) to which the rule applies;
• the price variation: it can be fixed or a percentage, either positive or negative. In other words, you can decide whether, when the configured conditions occur, your prices should increase or decrease, and by how much;
• the time interval, relative to the dates of stay, in which you want the rule to be valid, for example “From 23/12 to 27/12”;
• the days of the week for which, within that time interval, the rule should be valid (for example, only on weekends);
• the availability range, i.e., the minimum and maximum number of rooms or room types for which the rule is activated.

In addition to these, there are two other advanced and optional parameters: the time window, which defines the duration of the rule over time; and the sales speed, i.e., the number of reservations received in a given period of time that triggers the rule.

How to set rules on Zak

Zak has been designed and implemented to make even the most complex operations easier and more accessible, and this applies to the yield management module as well. To start, it is a good idea to have a clear understanding of the historical data on which to base your sales policies: data that can be obtained in just a few clicks through the statistics provided by the PMS.

Next, you will need to create a dynamic pricing plan that takes seasonality into account, which means structuring the most attractive rate for each day of the year and for each room type. This is where the demand forecast is created.

Once this is done, you can proceed with publishing prices and setting distribution rules on Zak, such as early bird rates for those who book well in advance, or last minute rates for last-minute customers. Alternatively, you can use the “sales speed” feature to adjust prices according to the sales speed of your property (but remember to check market variability at least once a year!).

The rules can be set in hierarchical order and removed at any time: the tool will automatically restore the initial price. In short, the operational advantages (and potential economic return) are considerable.

Examples and strategies of yield management?

The bad news is that there is no one-size-fits-all strategy, because each business has to deal with its own inventory and optimal profit. However, the great freedom of maneuver provided by software such as Zak leaves ample room for testing and customized applications.

For example, a seaside hotel noticed that, during the summer, it mainly attracts families interested in double rooms. It therefore decided to increase the average cost by an additional 10% compared to the seasonal rate only for this type of room and only in the period from June to September. But only if the occupancy rate is above 70% and with a booking window of 5 days from the arrival date (last-minute reservations when supply is scarce).

Conversely, a business hotel receives few reservations during the weekend, when there are fewer corporate events in its area. To increase sales, it sets a rule whereby, with an occupancy rate of less than 60% and a maximum of 7 days in advance of the arrival date, rates are reduced by 10%. In this way, it encourages reservations and makes a profit instead of leaving a room unsold.

The advantages of Yield Management and WuBook software

In conclusion, we can say that yield management software is an essential tool for increasing hotel reservations. Through a yield management program, even the smallest accommodation facilities—which do not yet have a real RMS—can begin to experiment with simple revenue optimization strategies.

This is exactly what Zak allows you to do, enabling you to:

• configure rules and prices flexibly;
• increase/decrease costs for early or last-minute reservations, also defining the duration of individual rules;
• adjust prices based on sales velocity;
• have everything updated in real time, including synchronization with planners and calendars and connection to over 100 connected OTAs;
• collect data to make forecasts and strategies increasingly accurate and effective.

Take your hotel marketing strategies to the next level and start optimizing sales and improving margins now!