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 early1990s, 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, JulyAugust 1989, 1019.

2M. D. Hooper, "Rattling SABRENew Ways to Compete On Information," Harvard Business Review, 68 (February 1990): 118125.

3R. D. Hanks, "Discounting in the Hotel In

. . .
ing industry does no better than track GNP (gross national product) growth.8 Since 1977, however, the industry as a whole has not performed even this well.9 In the early1990s, the hotel/gaming industry is plagued by overcapacity and a soft economy, both of which increase the appeal of a marketing tactic such as yield management. Financial and human resources are the critical resource areas for the hotel industry. In spite of the softness of demand, capital remains available for new facility construction in the hotel industry, because new properties tend to be more profitable than older properties.10 Human resources represent a continual problem for the hotel industry. The influx of immigrants into the United States in the 1980s provided the hotel industry with a steady supply of lowcost workers. Energetic and successful efforts are now being made to unionize these relatively new arrivals, and the human resources factor will likely represent a major problem area for the hotel industry  8K. Clark, and M. H. Gerstein, "Marriott Corp," Value Line Investment Survey, 13 March 1987, 1781. 9Sharav, 17721773). 10Ibid.  throughout the 1990s. The financial performance of the hotel industry is considered in the context
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Some common words found in the essay are:
Investment Survey, American Airlines, Poor's Corp, Administration Quarterly, Hotel Industry, Motel Management, Activity14 Equity, Procedure Yield, Western Motel, Profitability11 Operating, yield management, hotel industry, cornell hotel restaurant, cornell hotel, hotel restaurant, management concept, yield management concept, occupancy rates, hotel/gaming industry, hotel motel, american airlines, hotel restaurant administration, restaurant administration quarterly, computerized reservations, administration quarterly 33,
Approximate Word count = 2104
Approximate Pages = 8 (250 words per page)

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