Have we taken yield too far?

Progress, efficiency, process and bottom line focus all have their place, and a very important place at that. Sometimes we can’t help thinking we may have taken some things too far. The science of yield management often seems to perhaps fall into that consideration.

Before you start to think we are soft, touchy-feely hoteliers, consider that 25 years ago when operating 10 London upscale hotels as part of a portfolio there were several screens in our office showing availability, prices and demand. We questioned unit decisions daily. Without knowing it we were assisting in pioneering yield management and remain proud of that fact. It also made the hotels a lot of money, just as today. We, however, keep seeing examples of instances that question some of the present-day thinking and how it is executed.

One situation occurred last week. A friend happened to mention he was very happy with a particular hotel and thought he had a good rate at €250 (US$327). The hotel was high-end midmarket, 3-star and not located in a gateway location to anywhere. He was new to the particular market, which we knew well, and we were aware the specific hotel had an annualized rate of around €100 (US$131) although probably had peak months at €170 (US$222). As friends with local knowledge we offered to renegotiate his rate. During that process and at a particular high, due to a one-off film crew over two days, his room rate soared to €400 (US$523) per night plus taxes.

Economic rules, supply and demand and all those often valid business practices are one thing, but this had shades of complete rip-off about it. What do you think, and have you had similar experiences with this type of approach?

As you may have expected our associate has found an alternative hotel where he is very content and has a fair market rate that has been guaranteed for six months. Whilst accepting that in some circumstances a product or service may be worth what someone is prepared to pay, it does not seem a good strategy to encourage retained and repeat business.

At the end of the day it is a question of balance. In a world where for many reasons yield managers have become all-powerful, are paid on results and often have the final decision, who is going to determine that balance, and who is looking after the customer? What is your opinion, and how are you managing and controlling yield in today’s environments?

One matter that it does highlight is the need for hotel general managers to have strong marketing skills and yield and rooms experience, which sadly is not always the case.