Yield Management at Aldemar - Essay Example

?Running Head: ALDEMAR HOTELS AND SPA Aldemar Hotels and Spa [The of the will appear here] [The of the will appear here][The name of the Professor] [Course] Why is yield management so important for Aldemar? Yield management is a growing practice among leading business enterprises in order to manage its unique resources in the best possible manner. It allows organizations to manage its resources in order to sell its for maximum profit for the right price and the right consumers. Yield management practices have become common in industries where the amount of inventory to be sold is fixed, o the resources are perishable or because consumers are willing to use the product at different prices. Yield management has become particularly important in the travel and hospitality industry. This is primarily because the resources such as airline tickets and available rooms in a hotel are fixed and cannot be increased or decreased to manage the demand of the consumers at different periods of time (Barnes, 2008). This is also the main reason that yield management is so important for Aldemar. It allows the owner to manage the hotel’s limited resources which includes its rooms in the best possible manner. The managers at Aldemar cannot increase or decrease its room capacity to facilitate the demand of the customers. When there is increased demand of the rooms during holiday season, the management risks losing its important and loyal customers when the rooms are already booked and they cannot overbook due to its long-term impact of the customers’ perception and the hotel’s reputation. Similarly during low demand of the rooms, Aldemar faces issues of decreased revenues and increased costs as rooms require maintenance and the organization has to pay for its overhead costs that remain more and less constant during all seasons. With the help of yield management, Aldemar can hope to move certain customers during the off-season thus keeping room occupancies more or less constant. What other approaches to capacity management could Aldemar use? There are other different approaches to capacity management that Aldemar can benefit from. One of them includes promotion. Aldemar Hotels can use promotion as a mode of attracting consumers during the off-peak season. They can offer rooms at discounted prices or could introduce new features during the off-peak season. They could use their online website to promote such offers. Another approach to capacity management is product development that falls under the category of demand management. Demand management includes managing price, promotion, reservations, and waiting etc. During the off-season, Aldemar Hotels can offer certain services and products that would attract a high number of customers. Aldemar can for example shift the opening and closing times of their hotels to accommodate their guests. They could allow guests to benefit from tour guides for discounted rates during off-peak season. Aldemar could particularly benefit from using its spa for product development. It could introduce new offers or products for consumers during the off-peak season. The third approach is to adjust the changeable resources in line with the demand of the organization. This is known as chase demand that involves sub-contracting, hiring part time labor, multi skilling and participation of the customers. For example, during peaks seasons, Aldemar can hire extra part-time labor to make up for the increased work load. They could add or share their equipment through partnership agreements. Furthermore, Aldemar can delegate extra work during off-season period such as renovations in the hotel rooms. Critically assess Aldemar’s current yield management practices (e.g. the organizational structures, procedures, performance monitoring). Even though yield management has come forward as one of the best approaches for managing capacity for the hospitality industry, many organizations fail to incorporate this management strategy in the best of manner. In this manner, they lose a great amount of revenue in the process. Aldemar’s current yield management practices allows setting room prices on the basis of three levels of decision making which include strategic pricing, tactical pricing and operational pricing. Aldemar has allowed its different level managers to make decisions regarding pricing based on their information about room occupancy. The managers are allowed to make these decisions based on collaboration with other managers. In this way, the hotel allows the managers to take hold of the decision making process since it is these managers who have the most important regarding the daily activities of the business. By decentralizing the pricing strategy to a certain extent, Aldemar allows flexibility in its pricing strategy while at the same time gives managers a sense of ownership towards the organization. Even as the company rewards individual hotel staff bonuses based on their season performance, it increases the motivation of the managers to keep a good track of the changes occurring within the market. Furthermore Aldemar’s owner makes the pricing decisions on well-informed decisions of Aldemar’s external and internal environment including an overview of the competitor’s pricing strategies. The pricing decisions are therefore well-thought of and allow the organization to maintain its performance along with keeping a check on their capacity. However, on a certain level, the prices of the rooms are not too flexible but we have to understand that the room rates are based on informed decisions that take in account a myriad of factors including forecast of the season and the revenue generated during last year. If Aldemar is more successful in making more direct sales (e.g via the internet), should it change it the way it manages YM in its hotels? If Aldemar is more successful in making more direct sales, it would have to make certain changes in its management of YM. This is because it would allow the organization to develop more flexibility and be able to better manage the customers and thus the need for yield management would decrease to a certain extent. The main way in which direct sales would impact YM would be the manner in which the hotel makes its strategic decisions. In terms of strategic decisions, the hotel allocates its pricing at an earlier period of time. With an increase in direct sales, the owners could benefit by decreasing the time allocation of their pricing done through the strategic approach. Aldemar is also thinking of increasing the reward on room sales and ADR as a result of direct sales. This would allow Aldemar to increase its room allocation through direct sales and less reliance would be required on yield management. Even though yield management is a good option for the organization at present, it still poses considerable issues for the organization that they can improve by increasing direct sales. Direct sales would also allow the organization to limit its pricing through strategic pricing model which is at times not as accurate as direct sales. References Barnes, D. (2008) Operations Management: An International Perspective, Ohio: Cengage Learning Read More