Yield management: a Common Strategy in Travel & Leisure
Yield management, also known as revenue management, is a pricing strategy and set of techniques used by businesses to maximize their revenue and profitability by optimizing the utilization of their limited resources. It involves adjusting prices dynamically in response to changes in market conditions, demand patterns, and customer behavior.
The primary goal of yield management is to sell the right product or service to the right customer at the right time, for the right price, to maximize revenue. This strategy is commonly applied in industries where capacity is limited and fixed, such as airlines, hotels, car rentals, cruise lines, and entertainment venues.
Optimal Occupancy or Optimal Customer Experience? Let’s do Both!
It has proven to be a significant challenge for many travel organizations to achieve both optimal occupancy and customer experience without hindering the customer journey. On the one hand, you want to push your inventory to the maximum to ensure that you do not end up with surplus stock. On the other hand, you do not want to bother customers with irrelevant content or trips that are already sold out. Although these two objectives may seem difficult to reconcile, they do not have to be mutually exclusive. With smart AI technology, you can achieve the best of both worlds.
Linking Inventory to Customer Data
An AI-driven decisioning engine enables you to link inventory to customer data and put ancillary products in front of the right target groups. This way, holidays, accommodations, or other items with high availability instead of scarce and popular inventory.
The algorithm of a decisioning engine also considers the likelihood that you will sell the holiday, trip, or accommodation during a certain period. Based on historical data and various external factors that influence demand, such as the weather, social developments, or price increases. If a situation changes, the algorithm responds immediately, for example, by prioritizing other items or offering an incentive.
Always an Up-to-date Inventory
If there is one important aspect in travel, in addition to offering the right content at the right time, it is ensuring that your inventory is up –to date. Imagine that you perfectly understand the customer’s travel needs, know via which channel to reach them and at what ideal moment, and then recommend a sold-out holiday… It’s hard to recover from that mistake.
Since you can link a decisioning engine to various data sources and synchronize data in real-time, your inventory remains up –to date, reducing the chance of serving inventory that is not available.
Maximize Relevance with Unique Business Rules
You can even enrich decisioning engines with your own business rules and knowledge to increase the relevance of your offerings. For example, based on experience, do you know that one of your target audiences is searching for family vacations in the Canary Islands during certain periods? Or is a special room upgrade popular among a certain type of travel group? You can manually add this knowledge to the algorithm. This way, you create a unique business strategy that puts data and human knowledge at the center.