Why Yield Management Is Important To Hotels - Essay Example

 Explain why yield management is important to hotels and critically discuss the advantages and disadvantages for the organization, its employees and customer. 1. Introduction Profitability can be characterized as one of the key criteria for evaluating a firm’s performance. This means that the revenues of each organization are the basis for characterizing the firm as successful or not in its industry. Of course, the balance between profits and expenses/ losses is necessarily taken into consideration when developing such task. Current paper focuses on the potential value of ‘revenue management, also known as yield management’ (Dopson & Hayes 2008, p.308) to hotels. In the context of hotel industry, yield management is a term used for describing a high range of techniques through which occupancy is appropriately managed so that the profits of a hotel are increased (Dopson & Hayes 2008, p.308). Therefore, yield management is quite important to hotels. However, in practice it has been revealed that yield management can also have a series of implications for the organization, its employees and customers; this issue is discussed below using literature published in this field. 2. Yield management – importance and implications for hotels Yield management in the hotel industry has a series of advantages. Baker, Huyton & Bradley (2001) note that yield management, if it is used in the particular industry, it can lead to ‘the increase of a room’s revenue and of its space’ (Baker, Huyton & Bradley 2001, p.291). It is explained though that yield management can play the above role only if staff is appropriately trained for offering customer service of high quality (Baker, Huyton & Bradley 2001, p.291). In other words, low employee efficiency can eliminate the value of yield management, either in the short or the long term. In any case, the value of yield management, as a key concept in the hotel industry, cannot be doubted. Indeed, yield management can highly benefit the hotel industry. The potential for accurate forecasting is considered as one of the most important advantages of yield management systems (Hsu & Powers 2001, p.261). However, the above benefit can be available only in hotels that use advanced IT systems that can monitor every organizational activity and provide accurate information in regard to the organization’s strengths and weaknesses (Hsu & Powers 2001, p.261). Yield management can also help hotel managers to make effective plans in regard to the potential expansion of the organization. For example, in order for a hotel to enter a foreign market, it would be necessary for the hotel’s managers to have an accurate view of the hotel’s profitability so that they are able to check whether the risk of potential losses could be undertaken or not (Hsu & Powers 2001, p.262). In other words, yield management is a critical tool for developing effective strategic plans. Moreover, Harris & Mongiello (2012) note that yield management can increase the competitiveness of a hotel proving valuable information in regard to the hotel’s internal and external environment, especially in regard to the position of competitors but also in regard to those processes that distinguish the hotel within its industry. Despite its value, yield management can be related to certain disadvantages. According to Abdel-Kader (2011) one of the most important disadvantages of yield management is related to its needs in terms of information. Indeed, a yield management system is based on a variety of information, related to all business activities (Abdel-Kader 2011, p.505). In practice, it has been proved that the data required for the efficient operation of a yield management system may not be available, a phenomenon more common today that yield management systems used in most hotels have become quite complex (Abdel-Kader 2011, p.505). Moreover, it has been proved that yield management cannot perform well under specific conditions, as for example in the following cases: a) ‘when a hotel serves a single market segment or b) when a hotel has less than 50 rooms, i.e. in a hotel that has low occupancy rates’ (Abdel-Kader 2011, p.505). This means that yield management systems are primarily designed for supporting the operations of hotels that are already well established in the market. At the next level, Weber & Chon (2002) note that today yield management has been highly developed compared to the past. The systems of yield management currently used in hotels worldwide can be so complex that they can be only managed by highly skilled staff (Weber & Chon 2002, p.198). For example, there are hotels where yield management is developed by individuals working exclusively on this subject (Weber & Chon 2002, p.198). This trend leads to the following assumption: in order to be able to respond to the needs of yield management, hotels operating in the modern market need to establish relevant training programs, ensuring that all employees involved in the particular activity are appropriately skilled. Bowie & Buttle (2012) also highlight the high dependency of yield management on IT systems. The above researchers not that yield management systems can fail in providing accurate image of organizational performance when the data entered in these systems are not accurate (Bowie & Buttle 2012, p.168). Even minor mistakes when typing data that will be used by a yield management system can eliminate the accuracy of the information provided by the above system (Bowie & Buttle 2012, p.168). The over-dependency of yield management on IT systems has been considered as the most significant disadvantage of the particular framework. 3. Conclusion When having to evaluate the effectiveness of yield management systems, the following issue needs to be explored: are the managers involved in the relevant processes appropriately skilled in order to respond to the system’s requirements? Also, even if a yield management system has successfully operated for a particular period of time, its effectiveness in the long term cannot be secured. As explained through the literature provided above, yield management can significantly benefit hotels but only under certain terms. The efficiency and appropriateness of resources involved are of critical importance in hotels that are based on yield management systems. If compared, the benefits of these systems can be considered as more important than their disadvantages, under the terms that in modern hotels the quality of IT systems and the training of employees are highly supported. (Words 1016) References Abdel-Kader, M. (2011). Review of Management Accounting Research. London: Palgrave Macmillan. Baker, S.,Huyton, J. & Bradley, P. (2001). Principles of Hotel Front Office Operations. Belmont: Cengage Learning EMEA. Bowie, D. & Buttle, F. (2012). Hospitality Marketing. London: Routledge. Dopson, L. & Hayes, D. (2008). Managerial Accounting for the Hospitality Industry. Hoboken: John Wiley & Sons. Harris, P. & Mongiello, M. (2012). Accounting and Financial Management. London: Routledge. Hsu, C. & Powers, T. (2001). Marketing Hospitality. Hoboken: John Wiley and Sons. Weber, K. & Chon, K. (2002). Convention Tourism: International Research and Industry Perspectives. London: Routledge. Read More