Post authored by Heidi A. Voorhees, MBA, CAE, Senior Vice President, Housing, Experient
With the new seller’s market in full swing, revenue managers are playing a bigger role than ever in deciding how much inventory to give to a group, and at what rate. This makes the job of the show organizer even more challenging, as it puts the onus on them to prove their event’s value. They must provide detailed history information in order to obtain the inventory needed, and hopefully at a rate that works for the group’s demographics.
So, what is an organizer to do if you aren’t getting the number of rooms you need at the rate you want?
Enter rate yielding. Airlines have used rate yielding since the late ‘80s, and it spread to other travel related industries. Most notably for us, the hotel industry began aggressively using it for the last 10 years or so. According to Netessine and Shumsky’s “Introduction to the Theory and Practice of Yield Management,” yield management is a variable pricing strategy based on understanding, anticipating and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource (such as airline seats, hotel sleeping rooms or advertising inventory).
But what does rate yielding look like when we apply it to a city-wide event?
First, it is important to have the organizer, hotel sales, revenue manager and housing company all aligned on the objectives and room block strategy.
Next, the flexibility to manage multiple rate changes is critical. The hotel contract needs to include clauses where the hotel would have the opportunity to increase rates a maximum of “X” times during the booking window, based on demand. A ceiling can also be set to include maximum negotiated rates. This allows flexibility as well as placing certain restrictions on yielding rates, thus affording a comfort level to show organizers that their attendees are securing the best rate in the marketplace.
Then, a communication plan and timeline needs to be established between all parties addressing when the rates will be reviewed and decisions made. Once a rate change is made, it needs to be updated in any location visible to all participants to avoid confusion. Also, messaging regarding the need to book early in order to get the best rates is key, and will help create a sense of urgency.
A collaborative case study between CONEXPO-CON/AGG, Experient and MGM Resorts International will be presented at IAEE Expo Expo in December, and a detailed white paper will also be released soon. The rate yielding strategy utilized for CONEXPO-CON/AGG grew the blocks at 13 MGM properties by 15% over contracted value at lower-than-market rates.
Rate yielding is not for every show, but if you need the flexibility to increase or decrease rates based on demand, or increase existing room blocks during the booking process without paying transient rates, then it might be a viable option.
Want to learn more? Come visit us in Booth #625 at IAEE Expo Expo or contact me now!