Pulse August 2021 | Page 18

cost more on weekends than on a weekday , for example .

● Yield Management : a specific strategy within the practice of revenue management . It is a method of selling the right inventory , to the right customer , at the right time , at the right price , with the goal of maximizing profit , or yield .

PUTTING IT INTO PRACTICE

Understanding the concepts outlined above will make further exploration of revenue management much simpler . That said , a set of definitions is a poor substitute for a more comprehensive sense of how these concepts function in the real world , which makes the examples provided by other industries particularly illuminating .

Because revenue management as we know it today began with the airline industry ( and because anyone who has purchased a plane ticket in the last forty or so years is already familiar with the concept on some level ), it ’ s likely the best starting point for a more technical exploration of exactly how practices like yield management or dynamic availability might translate effectively to the spa industry .

Consider the illustration below , which portrays four distinct pricing and booking scenarios for the same 100-seat flight . Example A represents the maximum possible revenue that the airline can create on the flight , given the static $ 1,000 price point of each ticket . Ideally , the airline would sell every seat on every flight at the highest possible price . However , the realities of price sensitivity and fluctuating demand make it likely that , if all 100 seats on the flight were offered only at that higher price point , many — or even most — of the seats would remain unoccupied , as in Example B . In this instance , the revenue produced by the flight falls by 75 percent , likely due to its higher , static price point .

Example C illustrates how the revenue created by the flight may be affected if 20 seats are sold at the higher rate of $ 1,000 , while the remaining 80 are filled by passengers paying a rate of $ 500 . By offering this discounted rate ( perhaps to early purchasers , bulk buyers or those who were flexible about when they booked ), the airline could replace the lost revenue from Example B with $ 40,000 that would have otherwise disappeared forever when the plane took off at 25 percent capacity .

Even if offering a lower rate for

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A B C D

Full Price ($ 1000 ) Reduced Price ($ 500 ) Unoccupied