Yield management is about making the most of a limited resource. The resource restaurants have is available seats, and it is a wasting asset – if you don’t fill the seats tonight, the possible revenue that you could have made is gone and making the most of them is important because it feeds into revenue and ultimately profit. Airlines are famous for yield management, always looking at the RPASK (Revenue per available seat kilometre). The metric that you need to look at is Revenue per Available Seat Hour. RPASH is calculated by getting the revenue for the hour and dividing it by the number of seats that you have. If the restaurant is only half full, your RPASH will be lower, if everyone orders entrees only, your RPASH will again be lower again.
Airlines watch their Revenue per available seat kilometre very closely. Like restaurants, they have seats which they are paying for whether they fill them or not.
The common ways to increase RPASH is to decrease the amount of time each party spends at their table, increase the average spend and also decrease the time that a table stays empty after a party leaves.
Here are some ideas to increase your RPASH.
- Breakfast, Lunch and Dinner. Did you ever wonder why McDonalds created the concept of a take away breakfast? They pay rent for the restaurant 24 hours a day, 7 days a week 52 weeks a year. This is the same concept with Southwest Airlines. Herb Keleher realised that a plane only makes money when it is in the air, and therefore the team at Southwest worked on the 30 minute turn of an aircraft. Get the aircraft in the air as quickly as possible and keep it up there as often as possible. That is the secret behind one of the most profitable airlines in the world!
- Seven days a week. This is the same as Breakfast, Lunch and Dinner, you are paying the lease each day, why not make the most of it. (OK, some of you will have realised, this isn’t increasing RPASH, but increasing available seat hours, but that is OK as you will be spreading your fixed costs, like rent over a larger number of hours).
- No more quiet Tuesday nights. Tuesdays are traditionally the toughest night for a restaurant, so running promotions to fill the seats will at least get some revenue. Maybe link in with a local cinema, or run a series of promotions to encourage people to come out on your quieter nights.
The better you do with yield management, the better your revenue will be. This decreases the ratio of fixed costs to revenue, which means that your overall profit margin will be higher. Just like hotels, which look at Revenue per available Room night, Revenue per Available Seat is one of the key metrics that restaurants need to look at.
- Late Dinners or desserts. Once the restaurant starts to slow, can you promote desserts after a movie or catch passing by traffic with your famous pavlova or crème brulee. A couple of desserts and maybe a nightcap is much better than an empty seat.
- Increasing the number of turns. The number of turns is the number of parties that sit at a table each night. Depending on your clientele and target market, you may be able to get another sitting in. Some restaurants do fixed sittings, say, 6PM and 8PM so that customers know if they are in the 6PM sitting, they need to be out by 8PM. This works well if people are going to the movies or the theatre.
- Create a pool of ready diners. The bar is a great way to increase your RPASH. Customers have a couple of beers before dinner and are sitting there ready and waiting as soon as a table is cleared.
- Increase your prices. An oldy but a goody. Check the local competition and see how you compare.
- Table optimisation. What is the average size of your bookings. Some restaurants and cafes attract more singles and couples, others larger groups. If all of your tables are for 4, it means that every single and couple is wasting seats and decreasing your RPASH.
- Last minute offers. If you are having an unexpected quiet night, why not Tweet a special or post it on your Facebook page. Work hard to get those extra couple of tables in. It can be the difference between a loss for the night and breaking even.
OK, there was 9 tips there, not 7, but some of these tips will increase the RPASH, others increase the number of Available Seats Hours that you have, (eg increasing the number of days or hours that you trade.) The big thing is to look at each sitting individually and try to optimise the results. Some restaurants do this without thinking about it. It is why there are separate lunch and dinner menus. People just aren’t prepared to pay the dinner price, so a cheaper lunch menu brings the customers in. Hopefully some of these ideas will help you increase you revenue and that will flow down to your profits.
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