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Rate Yielding By Location

September 8, 2020

Understanding Rate Yielding: Lessons by Market

When I speak across the US about managing and yielding rate, I am still shocked at how most people in this industry are reluctant to even consider the possibility.

I have shown park owners over and over again how just manipulating rate a few dollars here or there can result in thousands of additional dollars to the bottom line.

After having led seminars across the US on this very subject, even I was surprised where I found rate yielding this week.....based not on supply and demand, but demographic and having to do with medication.

I was in Bethany Beach DE spending time with family when I realized I had run out of my asthma inhaler. Through my insurance, I have an app showing me the cost at the different local pharmacies (see below.) My inhaler was almost $10 more at my location than a location 10 miles inland and in a less prosperous area. You see, Bethany Beach is a bedroom community for wealthy Washingtonians, and the pharmacies in the area know if you are in Bethany and you need medication, you are going to pay more than if you were a local living inland.

Some might consider this an unfair practice, but the market considers it the simple rule of supply and demand. If this product is demanded in the wealthy vacation spot, then the consumer will pay the price. It all goes back to this very basic principle of business:

Key points

  • The law of demand states that a higher price leads to a lower quantity demanded and that a lower price leads to a higher quantity demanded.
  • Demand curves and demand schedules are tools used to summarize the relationship between quantity demanded and price (Khan University)

The price locals are charged inland has been determined to be the price they will pay-the same rule applies to Bethany Beach.

When considering your perishable inventory item, "Site Nights Sold," consider the rule of supply and demand and what the market is-at any given time- willing to pay for your inventory. This will help your rate, occupancy, and overall revenue stream by matching market price and demand with your guests willingness to pay.