THE USE OF YIELD MANAGEMENT IN THE HOTEL INDUSTRY
This research examines the use of the yield management concept and procedure in the hotel industry. Yield management is a practice that, in the early 1990s, is widely used in the transportation and lodging industries. The practice received its first widespread applications in the air transportation industry and then expanded into the lodging industry through computerized reservation systems that interconnect the two industries.
The Yield Management Concept and Procedure
Yield management is a tactic to increase revenues and profitability.1 Yield management is the process of establishing different prices for similar services and allocating those services in a way to maximize revenue.2 On an airline flight, a preliminary allocation of seats may be made among the various pricing alternatives to account for all of the seats on the flight. In a hotel environment, a preliminary allocation of rooms for a specific period may be made among the various pricing alternatives to account for all of the rooms in the establishment.3 Airlines, however, will sell more than the number of seats allocated to a specific price level, to insure
1J. Alstrop, "Booking Control Increases Profits At Scandinavian Airways," Interfaces, 9, July August 1989, 10 19.
2M. D. Hooper, "Rattling SABRE New Ways to Compete On Information," Harvard Business Review, 68 (February 1990): 118 125.
3R. D. Hanks, "Discounting in the Hotel Industry: A New Approach," Cornell Hotel and Restaurant Administration Quarterly, 33 (February 1992): 15 23.
that the maximum number of seats on the flight will eventually be filled. Similarly, hotel managements will sell more than the number of rooms allocated to a specific price level, as a means of maximizing occupancy rates.4 When overbooking occurs, it is typically the holders of the less expensive airlines tickets who get bumped from the flight, or the holders ...