Индекс УДК 33
Дата публикации: 24.08.2018

The impact of yield management implementation on revenue of small hotels

Влияние управления доходностью на прибыль малых средств размещения

Stepanova V.E., Novgorodov P.A.
1. Applicant of the Department of Corporate Governance and Finance,
Novosibirsk State University of Economics and Management
2. Candidate of Economic Sciences, Vice-Rector for Strategic Development and External Relations,
Novosibirsk State University of Economics and Management
Abstract: The hospitality industry face a rapidly changing customer environment, where revenue depends on number of factors like competitor rates, weather conditions, political situation, festive season, special events etc. Leveraging the opportunities and forecast the demand to maximize revenue is only possible with an efficient yield management strategy.
The objective of this research is to investigate the role of yield management within small independent hotels to identify its positive and negative impacts both for the further improvement.
Using a questionnaire survey of ten reservations managers and directors of sales in small hotels in Saint Petersburg, yield management has been acknowledged as efficient tool that helps to increase the profitability. Its function will become more central to hotel operations, considering increased volume of online bookings, it will become a common practice in next few years.
The outcome of this study contributes to the fundamental importance of yield management practices have been implemented by small independent properties in Russia.
Keywords: yield management, demand forecast, hospitality business, room inventory, efficiency improvement


           Large hotels around the world spent an average of $253,000 on incentives pay alone for their sales and revenue management teams [1]. In today’s hospitality business, rooms and hotel`s services are no longer sold through one single booking channel but instead via a variety of distribution channels. Hotels have to juggle promoting properties, driving traffic to own website for online from multiple sources, and emphasizing future demand, all while strategically managing room capacity and pricing. Therefore, it is extremely important to implement an efficient and forceful multichannel management strategy.

           Due to the intangibility characteristics of hotels, distribution plays an important role in the Hospitality Industry. By creating and manipulating hotels’ accessibility, most consumer demands can be managed [2].

           Multi-channel management has been described as “the management of the conscious and active formation of a distribution system with a combination of several distribution channels appointed by a manufacturer” [3]. According to Reid and Bojanic, the role of multi-channel management can be misunderstood or perceived as indefinite and doubtful due to the distribution channels used by hotels, when compared to those utilized by producers, are not considered as traditional channels of distribution. The recognition of the most beneficial channel is the key element of the sales strategy that help to maintain the businesses volume profitable and consistency grow the number of bookings [4].

           This situation escalates each year with the increased role of online travel agents (OTA) that add a new dimension of complexity to distribution channel management. In Q3 2016 OTAs had 21.6% share of transient numbers rooms sold [5].

           When OTAs emerged as a platform for online distribution, rate transparency became even more important. However, despite the pros and contras of particular distribution channels, they are not only chosen by price, but also by their visibility and customer friendly content. Thus, implementing a multichannel management involves the consideration of rate parity since customer trust and loyalty can be approached by this tool.

           As hotel`s services cannot be stored or transported to the guest, it is very important that provide the consistent performance through all distribution channels, where the hotel is available to the guest. It can be achieved by establishing guaranteed accordance between the hotel direct price and the price of the particular booking channel. Therefore, both traditional and online distribution via third-party intermediaries and the hotel website become relevant [6].

           Direct booking channels not only help to build closer contact with the guest, but save the significant amount that paid to the third party intermediaries as a commission. Indirect distribution is characterized by channels in which the customer communicates with the hotel through at least one intermediary which is responsible for one or more channel functions. These companies can either be travel agents, tour operators or online travel agents (OTAs) who compete with direct channels by providing online travel planners with best-in-class shopping and booking experiences.

           The question is not only to choose, implement and control individual distribution channels but also to differentiate between them, it is crucial to identify which customers should be approached by which channel. Hence, it is important for managers to implement a productive multi-channel strategy [7]. Today, when the direct battle between the hotels and OTAs [8, 9] involve biggest hospitality corporations, the implementation of efficient multichannel strategy became more obvious.

           It the beginning, the situation was under control — hotels did not have the appropriate technology and OTA`s commission was reasonable. But now, when commissions and contract clauses have become unbearable and with the arrival of modern advanced hotel and marketing technology, an opportunity for change arose and finally a few big brands took the brave first step [10]. Nevertheless, hotels still face problems in trying to implement this strategy. Pricing on the internet is very transparent, and increases the “clicking around” tendencies of potential clients [11].

           In this situation efficient yield management can be an umbrella term for a set of strategies that enable capacity constrained service industries to realize optimum revenue from operations. There are a lot of yield management definitions, however, its objective is the same — provide better management of a limited available capacity to  maximize overall income by applying a flexible pricing policy based on a segmentation of the supply [12].

           In addition, Yield Management (YM) helps to achieve more accurate forecasting and real-time management of sales. The basic yield management formula for identifying the yield achieved is simply comparing the revenue achieved with the maximum potential revenue:

           YM has become part of mainstream business theory and practice in airline industry almost 30 years back [13]. In airlines industry YM refers to yield per available seat mile and aims to maximize the revenue through client segmentation, offering them ticket in the same plane, but on different rates and conditions. Finding the ideal point of balance between availability and rates is crucial for airlines. Many factors have to be taken under consideration that cannot really be predicted due to the high dependence of economic, political and social factors.

           Hotel industry has absolutely the same issues as the airlines: perishable inventory, customers booking in advance, lower-cost competition, and wide swings with regard to balancing supply and clients demand. YM gives the ability to simultaneously optimize price based on forecasted demand, price elasticity and competitive rates has obvious benefits.

           The extensive amount of the literature on YM recognizes its phenomenal importance for huge international hotel chains with thousands of rooms around the world [14, 15] and its inalienability of today business situation. A number of studies have looked into the implications of YM [16, 17, 18] in hospitality industry, but researches that examines the impact of YM on small independent hotels in Russia seem to have been a neglected area of study until recently. Furthermore, there is a very limited evidence available in the professional literature to understand how and why the YM techniques could affect a small hotel`s financial results and operational organization.

           Moreover, the focus of the existing studies tends to exaggerate the role of YM, highlighting only the positive impact on hotels [19]. This study aims to investigate the role of YM has on small independent hotels in one of the largest Russian city from the hoteliers` perspective and to identify its positive and negative impacts both for the further improvement.

           The research is based on small independent hotels in Saint Petersburg. The choice was made necessitated by the fact that city is one of the most popular among Russia and Europe — city is showing growth of 4,5% with 4,1 million tourists recorded in Q1 2017 [20] and characterized by supply of small hotels located in city center. The strong growth has been achieved due to increased volume of overseas visitors. Considering various travel demand of each foreign market and its impact on properties’ financial success, hoteliers have to carefully develop revenue strategy to keep the balance between the source markets throughout the entire year to maintain the average daily rate (ADR) high.


            Interviews were conducted with 10 reservations managers and directors of sales who are responsible for the hotel sales and revenue strategies in in 5 small hotels in Saint Petersburg. To ensure the confidentiality of the information, the interviewees were not identified, and five hotels were accordingly designated from H1-H5.

Table 1

Feedback on the impact of yield management implementation

Participated hotelReceived feedback
Case Study H1 profile


37-rooms hotel just recently completed the full refurbishment and expecting to cover the expenses by increasing the ADR within next 36 months. Currently in the process of implementing a long-term YM strategy.

Key international markets: EMEA

Main booking sources: OTAs and hotel`s website

 20-rooms boutique hotel located right in the city center.

Well-known on the market by one of the highest price within the competitors set explicable by property`s perfect location.

Key international markets: US and EMEA

Main booking sources: TOs, GDS and walk in guests

Case Study H2 profile


Case Study H3 profile


34-rooms hotel opened three years back. Due to lack of marketing activities hotel is still new to the market that causes low occupancy during the shoulder season. At the moment sales strategy focuses on moving business from the wholesalers to OTAs.

Key international markets: APAC

Main booking sources: TOs, OTAs and direct bookings

Case Study H4 profile


10-rooms hotel situated in the heart of the city. Due to limited inventory hotel is almost always running full.

Key international markets: US and Southern America

Main booking sources: OTAs

Case Study H5 profile


13-keys newly opened aparthotel. Sales strategy is not finalized yet due to senior management changed.

Key international markets: focused on domestic market only

Main booking sources: OTAs and direct bookings

           The 5 hotels making up the sample are small properties with below 40 rooms in inventory, the average capacity being 19 rooms. Only four-star hotels were targeted after pre-selection due to their enthusiasm on future research results and willingness to share the information on revenue and account management. Hoteliers were interviewed using open-ended questions to have an in-depth understanding of the YM concept.

           The explorative nature of this research requires a qualitative approach in order to comprehensively explore the ways of handling yield management tactics of different managers. All the interviews were conducted by using an interview sample contains 10 open-ended questions.  The main objective of interviews was to obtain a more itemized understanding of the components of a successful implementation of YM.

           It is important to mention that in order to prevent the hoteliers from providing answers that would be misleadingly favorable to the company for appearance purposes, the researcher approached the interviewees separately that helped to gain the “real answer” rather than the “right answer”, which could have been forthcoming if the hoteliers perceived that the researcher was in touch with their direct competitors.

Table 2

Summary of case study results

Case StudyHow often do you implement YMWhat kind of YM techniques do you useHow efficient YM helps to manage the inventoryHow YM influence

on client relationships

Describe the importance of YM for your hotel
H1DailyUse specific software that analyzes thedata and helps to manage the rateThe main and most important benefit is maximizing the revenue through seasonal ratesHelps to forecast the number of

reservations to accept. Could be a great supporting tool in the future, however YM

alone doesn’t build the client relationship and it can’t because of its strict rules.

Almost all S&M activities depend on the YM. It helps to plan the budget and focus on the most important markets
H2Never heard about YMNever used any techniques or tools as use the price list compiled twice a yearInterested on the impact on the market, but do not see the necessity of regular YM for particular hotel due to consistently high demandWould like to use YM to minimize the number of reservations that regretted or overbooked that affect property`s reputation and rankingDo not see the need for YM when the hotel has a strong reputation and stable relationship with clients
H3Monthly when revise the budget and sales plan for the next 4 weeksSoftware that helps to identify the rate cap and create specific packagesThe key advantage is the software`s integrations with OTAs that make the rate update easier and efficientAs main objective is maximize the revenue, some packages are valid for a very limited time frame that not always suites the direct clientsHelps to make the precise forecast
H4Almost never

because hotel is too small

Overbooking (for peak periods of International Economic Forum and New Year holidays only)Right balance of inventory and rates allows to get the bookings in advanceDoes not influence at all as hotel is almost always sold out without YM. Clients partnerships are built on individual relationships,

they’re not built on YM system.

Difficult to answer as basically no YM is implemented on regular basis
H5Each week when update the rates on OTAsDynamic pricingHelps to increase the occupancy by advanced and last-minute reservationsMajority of guests do not used to dynamic pricing and often surprised when previous rate increased (especially on OTAs websites). Rate availability is the main cause of relationship rows with clients.YM is the only way to achieve the target at the end of each month, hope to implement it more efficient throughout the year



           Findings of conducted research show that the majority of participated hotels mentioned that YM has a positive impact on productive sales. YM is found to be beneficial, efficient, profitable and useful. These characteristics recur most frequently during the interviews. Interviewed managers consider that these techniques provide food for thought and further improvement not only for revenue, but the entire hotel operations.

           Nevertheless, two out of five hotels do not apply YM at all. H2 never heard about the YM techniques as its sales strategy based on the buyout contracts (“We don’t think YM could impact on our financial results, because we sell rooms based on contract agreement. Once the contract established, which determines tariffs for the next 12 months and commitments for each party, each year we just have to review it accordingly”). H4 is familiar with YM tools, but practically do not implement it as the property has 8 rooms only and almost always sold through OTAs (“YM allows getting as much money as you can from the available rooms. It might be great to practice in for big properties, but not for small hotel like us. Moreover, YM mainly based on the figures but it forgets about what the guests’ needs, which make a gap in communications and relationships”).

           Other four properties noticed the positive impact YM principles from a day-to-day point of view. Precise forecast of the demand provided by YM software helps to manage the entire process more cost-efficient: estimated number of reservations, cancellations, no-shows and walk-ins allow adjusting the feasible income.

           It should be noted that H1 mentioned that in overall YM program is an excellent optimization tool for accurate pricing strategy, however it is critical to have the properly trained staff who can handle the moment-to-moment changes occurring in the data in a timely manner. YM programs provide forecasts, statistics, figures and appropriate recommendations. But when it comes to accept or regret a room reservation, and for choosing among a number of risks, it is only reservations manager who has to take the right decision.

           Generally, most of participated managers are trying to be familiar with new YM trends in the hospitality.  For them it is obvious that improving the revenue management helps immediately refine financial results. Three interviewed managers (H1, H3, H5) mentioned that the implementation of YM techniques in small hotels became a common sense practice in the business world where more and more bookings are generated by OTAs.



           The outcome of this study contributes to the knowledge about YM and its implementation by small independent properties in Russia by answering the question of how YM affects sales strategy and hotel operations in general. The comments gathered in the interviews confirm the fundamental importance of the fact that YM practices have be implemented in today`s business reality and used not only by sales and marketing teams, but operations as well.

           This research reveals that YM is mainly used over the low season when the demand is critical, however techniques are neglected over the shoulder season. Negative effect has been mentioned during the peak periods when the hotels have to reject the reservations. In other words, if the market conditions are weak and in favor of the client, YM plays a supportive role in order to bring more business. And if the market situation is strong when city is fully booked, the client relationships are negatively affected by YM because of limited availability, high rates and inflexibility.

           The findings confirm that YM is recognized as the sought-for tool that helps to optimize the occupancy, hotel positioning and the financial results, but does not used yet on a daily basis by all interviewed hoteliers. In few cases, YM has been indicated as needless technique that will not influence the revenue due to outdated strategy or very limited inventory. Depending on staff expertise in YM, indeed, it can significantly improve or impair the business volume and relationships with guests that are so important in hotel business.

           There are a number of managerial implications derived from the findings of this research that should provide invaluable insights for hotel managers (reservations and revenue departments in particular). The findings have practical implications for leveraging best practices to improve the performance in small hotels in Saint Petersburg.

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