Yield management (or revenue management) can be seen in a wide variety of industries, such as airlines, hotels, car rentals, cruising, casinos, television advertising, apartment rentals, retailing distribution, logistics, sports and performing arts. In the international hotel industry, revenue management practices and procedures are now so well accepted that they are seen as the competitive advantage of the future. Indeed one commentator has stated that “The mantra “location, location, location” is fast becoming replaced with “revenue management, revenue management, revenue management”’ (Hales, cited in Chase, 2007). However, it has long been recognized that its introduction is far from plain sailing and that the successful implementation of revenue management requires far more than having the right dedicated technology. There are a variety of managerial and organizational factors that have an enormous impact on the levels of benefits obtained from such a system. One critical success factor is effective | management of people behind the system. An analysis by Huyton and Peters (2000) of a large 180- bedroomed hotel in Warwick illustrated some of the problems that can occur during implementation.

Prior to introducing a yield-management system, the hotel had used the Champs management information system, which provided a good method for providing occupancy reports and statistics, but had only a limited use for forecasting, which is a fundamental part of yield management. It was essentially retrospective and was not able to provide meaningful forecasts about the future. Forecasting of demand is crucial to give rooms managers the confidence to ‘hang out’ for the highest possible rate. This idea of ‘hanging out’ for a higher rate, rather than taking the first available customer that comes along, is an essential part of yield management. One implication is that the volume of business for a hotel may remain constant but, through effective yield management, the amount of profit yielded by each customer may increase. Knowing when to ‘hang out’ for a higher rate is a management skill, helped by reliable data and forecasting methods. In addition to the forecasting system, an effective yield-management system calls for a computerized decision support system, such as Fidelio, which was used in the case study hotel, and effective communications within the hotel.......

Case study review questions 

1. Summarize the issues that are likely to detract from an organization-wide pursuit of maximum yields. 

2. What techniques can be used to improve a hotel’s accuracy in forecasting demand? 

3. To what extent do you think that fluctuating prices, which are associated with yield-management systems, may undermine customers’ trust in a hotel brand?