Yield management
Yield management is about maximising the total revenue which you can earn from your Guesthouse or B&B business by regularly adjusting your prices up or down, based on on your knowledge of what is happening on the ground and what your competitors are doing.
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Lowering your prices can attract more customers. Price reduction is an effective way of maximising the total sales of a perishable product.
Yield Management: Price Reduction Example
- Fáilte Guesthouse normally sells rooms at €60 per night.
- Business is slow due to the recession. They decide to promote a special offer via their website, providing accommodation during the mid-week at a reduced rate of €45 per night.
- They sell all their rooms and earn more total sales than they would have had they kept their price at €60.
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Yield Management: Price Increase Example
- Fáilte B&B normally sells rooms at €40 per night.
- A major music festival takes place in their local town during the last week of September each year.
- They increase their room rates to €50 for this week as demand for accommodation is very high at this time.
-They sell all their rooms at €50 and earn more total sales than they would have had they kept their price at €40.
Remember!
If you are over the VAT threshold of €37,500 in sales value per annum, you need to add 13.5% to your price.
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