THE SHORT HISTORY OF REVENUE

1970: Yield management was introd!ed "# airlines w$o

realised t$at t$e# needed to $a%e a strateg# &or o&&ering an
identi!al &l#ing e'(erien!e to di&&erent !stomers &or di&&erent
(ri!es) "ased solel# (on t$e time at w$i!$ t$e# "oo*ed and
t$e &le'i"ilit# t$at t$e# re+ired,
19-.: /meri!an /irlines lan!$ed Ultimate S(er Sa%er &ares in
an e&&ort to !om(ete wit$ low !ost !arrier 0EO01E'(ress,
1990: Re%ene management s(read to ot$er tra%el and
trans(ortation !om(anies) s(e!iall# at National 2ar Rental,
199.: Hotel started in an attem(t to rationalise t$e wide %ariet#
o& rates t$at t$e# were !$arging di&&erent !stomers,
THE 2ON2E0T OF REVENUE 3/N/4E3ENT

Re%ene 3anagement is a"ot ma*ing (redi!tions and de!isions
a"ot $ow m!$ and w$at t#(e o& "siness to e'(e!t) and t$e
s"se+ent de!isions a manager ma*es to get t$e most re%ene
&rom t$at "siness,
T$is !on!e(t was originated in t$e airline indstr#) "e!oming
dis!onts) ad%an!e5(r!$ase or di&&erent &ares t$e norm &or airline
(ri!ing, 1i*e airline indstr#) $otel !om(anies $a%e a !ommon
(ro"lem: t$ere is a &i'ed in%entor# o& (eris$a"le (rod!ts t$at !annot
"e stored i& nsold "# a s(e!i&i! time,
T$e goal o& re%ene management is t$at it in%ol%es selling t$e rig$t
rooms to t$e rig$t gests at t$e rig$t rate at t$e rig$t time, Sele!ting
re%ene management strategies and ta!ti!s is reall# a"ot (i!*ing
and !$oosing t$e reser%ation #o want, Ea!$ da# is a se(arate
sitation and im(lements ta!ti!s "est sited to #or (ro(ert#) #or
gests) #or mar*et and #or demand !onditions, T$is is done
t$rog$:
Capacity Management) also !alled sele!ti%e o%er"oo*ing)
"alan!es t$e ris* o& o%erselling gestrooms against t$e
(otential loss o& re%ene arising &rom room s(oilage, 2a(a!it#
management strategies sall# %ar# "# room t#(e and it mig$t
"e e!onomi!all# ad%antageos to o%er"oo* more rooms in
lower5(ri!ed !ategories) "e!ase (grading to $ig$er5(ri!ed
rooms is an a!!e(ta"le soltion to an o%ersell (ro"lem, /
wal*ing gest leads to gest dissatis&a!tion and will !$ange
$otels or "rands i& o%er"oo*ing relo!ates t$em too o&ten, In
addition) $otel management mst "e aware o& $ow t$e lo!al
laws inter(ret o%er"oo*ing,
Discount Allocation in%ol%es t$e time (eriod and a%aila"ilit#,
T$e (rimar# o"6e!ti%e is to (rote!t enog$ remaining rooms at
a $ig$er rate to satis&# t$e (ro6e!ted demand &or rooms at t$at
rate) w$ile at t$e same time &illing rooms t$at wold ot$erwise
$a%e remained nsold, /nd se!ond o"6e!ti%e is to en!orage
(selling) "t t$is te!$ni+e re+ires to estimate t$e o& (ri!e
elasti!it#) re&erring to t$e relations$i( "etween (ri!e and
demand,
Duration Control (la!es time !onstraints on a!!e(ting
reser%ations in order to (rote!t s&&i!ient s(a!e &or mlti5da#
re+ests7 t$is means t$at a reser%ation &or a one5nig$t sta# ma#
"e re6e!ted) e%en t$og$ s(a!e is a%aila"le &or t$at nig$t,
T$ese strategies ma# "e !om"ined "t it mst "e !ationed "e!ase
a gest mig$t not nderstand t$e reason, 0ro(er se o& re%ene
management relies on selling7 it ne%er di%lges t$e re%ene
management
3/IN F/2TORS OF HOTE1 REVENUE 3/N/4E3ENT

T$ere are t$ree main &a!tors) w$i!$ a&&e!t Hotel Re%ene
3anagement:
1engt$ o& sta#: is a term !ommonl# sed to measre t$e
dration o& a gest in a $otel,
Sta#: lengt$ o& sta# &rom a s(e!i&i! !$e!* in date to a s(e!i&i!
!$e!* ot date,
0ri!e: it is w$at a "#er (a#s to a!+ire (rod!ts &rom a seller
8in!lding dis!onts &or instan!e9,
Rate: it is a tari&& integrated in a ran*ing o& rates,
2$annel: Tor O(erators) OT/) 2RS) 4:S) et!,
Segment: !or(orate) leisre) et!,
TOUR O0ER/TORS

Histori!all#) TT,OO, $ad s(rema!# o%er leisre mar*et) e%en setting
rates o%er $otels, ;t Irr(tion o& Internet !$anges (la# rles "e!ase
now $otelier !an !ontrol $is or $er a%aila"ilit#) domaining $is or $er
d#nami! rates) e%en red!ing TT,OO, (resen!e in Ur"an 3ar*ets,
So) TT,OO, are o(ening new wa#s o& "siness to sr%i%e: sing FIT
rates to distri"te t$rog$ Internet) modi&#ing !ommer!ial mar*5(
8&rom ;<; to ;<2 as 2RSs9 &ollowing strateg# o& in!reasing %olme
o& sales in &ront o& margin o& "ene&it,
Howe%er) FIT rates !ase dis(arit# (ro"lems in &a!e o& Hotels and its
distri"tors, In re(l# to t$is sitation) Hotels mst demand (ledge o&
o(a+eness) !reating (a!*ages, /lso) Hotels mst demand:
2ontra!t !lase to a%oid internet distri"tion o& &it rates
/ minimm mar*5(
2ontra!t !lase to !ontrol o%er (artners
Eliminating se!rit# +otes
0romoting &ree sale
2RS 82ENTR/1 RESERV/TION SYSTE39 0RESENT1Y

2RS $as e%ol%es &rom ;<; to di%ersi&i!ation) ;<; = ;<2 as a reslt
o& irr(tion o& internet "t 2RSs !annot o&&er same (rod!ts 8t#(e o&
(romotions9 "e!ase t$e# $a%e not an a((ro(riate te!$nolog#,
/not$er +estion is (arit# o& rates "e!ase t$ere is a iron sr%eillan!e
"etween !om(etitors,
;<; 8;USINESS TO ;USINESS9 /N: ;<2 8;USINESS TO
2ONSU3ER9
;<; and ;<2 are "ot$ terms sed in e5!ommer!e, First des!ri"es
"siness5to5"siness transa!tions "t se!ond des!ri"es "siness to
!onsmer transa!tions,
EVO1UTION IN E1E2TRONI2 :ISTRI;UTION

Hotel distri"tion !$annels are ndergoing !$anges "e!ase
ele!troni! distri"tion o& room in&ormation) (ri!es) and a%aila"ilit# $as
!$anged t$e wa# t$at $otel (ro(erties and !$ains intera!t wit$ t$eir
%endors and !stomers, 2onse+entl#) as s$own in ne't e'$i"it)
ele!troni! distri"tion5!$annel o(tions !onstitte a !om(le' we" o&
!$oi!es t$rog$ w$i!$ s((liers and "#ers o& $os(italit# ser%i!es
mst na%igate to ensre &a%ora"le transa!tion reslts, T$is &orm o&
distri"tion ma*es "oo*ing $otel ser%i!es more e&&i!ient t$an are t$e
&ormer tele($one5"ased a((roa!$es) "t <0> o& !stomers w$o loo*
at t$e !$ain?s we"site end ( !alling t$e !$ain?s reser%ation !enter to
ma*e a "oo*ing,
Hotels and !$ains are sing ele!troni! distri"tion to red!e !osts "#
s$i&ting transa!tions &rom intermediaries to t$eir own &a!ilities t$rog$
dire!t !onne!tions and we"sites "e!ase t$is sa%es intermediaries?
&ees 8tra%el5agen!# !ommissions) 4:S &ees (er transa!tion9, 3ost o&
online "oo*ings will "e made "# leisre and nmanaged "siness
!stomers 8Hotel and 1odging 2ommer!e <00<5<00.) 0$o2s@rig$t
In!,) No%em"er <00<9) !$ains (romote lo#alt# (rograms wit$ t$eir
we"sites &or t$em, :e&initel#) $otel !$ains in!reasingl# se t$eir own
we" sites) in !on!ert wit$ ot$er mar*eting and sales e&&orts) to dri%e
in&ormation deli%er# and online "oo*ings,
4:S?s 84lo"al5distri"tion s#stems9 are re(ositioning t$emsel%es to
"e!ome ma*eting and ser%i!e !om(anies &or t$eir s((liers)
(rin!i(all# tra%el agen!ies) !$anging t$eir &o!s &orm airlines t ot$er
tra%el5indstr# segments, T$ere are &or 4,:,S, !lassi&ied in t$ree
3ar*ets: Ero(e 8/mades9) US/ 8Sa"re and 4alileo9 and /sia
8@orlds(an9,
Tra%el agen!ies 8sometimes !alled A"ri!* and mortarA agen!ies9 are
also trans&orming t$emsel%es, Fa!ing &inan!ial (ressre) t$e# are
in!reasingl# sing t$e internet as a !ost5sa%ing and ser%i!e5e'tending
tool, T$e# are re(la!ing !ommissions wit$ in!enti%e (a#ments &rom
s((liers) in!lding $otels) &or s$i&ting mar*et s$are, E%en t$e# are
loo*ing &or wa#s to e'(loit t$e internet) grow t$eir s$are o& re%enes
&rom sor!es ot$er t$an airlines) and im(lement alternati%e5(ri!ing
s!$emes,
:istri"tion5ser%i!e (ro%iders 8:S0s9 (ro%ide swit!$es t$at lin* $otel
2RSs wit$ 4:S and online sites) !ommission5and &ee5(a#ment
ser%i!es) re(resentation ser%i!es) and 03S ser%i!es,
RE1/TIONSHI0 ;ET@EEN O22U0/N2Y /N: HOTE1?S R/TE

@$at?s t$e degree o& lin*age "etween a $otel?s rate and its
o!!(an!# le%els &or $otels in di&&erent mar*et segments nder
%arios !om(etiti%e sitationsB 2ornell Uni%ersit# stdies &rom <001
t$rog$ <00C re%eal t$at $otels t$at dro( t$eir (ri!es relati%e to t$eir
!om(etiti%e set !a(tre mar*et s$are &rom t$e !om(etition "t do not
gain $ig$er Re%0/Rs t$an t$ose same !om(etitors) t$en t$ese
sggests to $old relati%e rates !onstant e%en w$en demand dro(s
nder s(e!i&i! !om(etiti%e !onditions, In ot$er words) raising (ri!es
a"o%e t$ose o& a $otel?s !om(etiti%e set will lead to loss o& o!!(an!#)
"t t$at loss does not diminis$ Re%0/R,
4ood re%ene management e'ists w$en $otel rates and o!!(an!ies
are (ositi%el# !orrelated, 2om(aring t$e relations$i( "etween
a%erage dail# rate and o!!(an!# &or $otels t$at were (ri!ing a"o%e
t$eir !om(etition and &or t$ose t$at *e(t t$eir rates "elow t$ose o&
t$eir dire!t !om(etitors) we !ome to !on!lsion o& $otels t$at set
rates 6st slig$tl# "elow most o& t$eir !om(etitors are li*el# to $a%e
strong and (ositi%e !orrelations "etween t$eir /:Rs and o!!(an!ies
"t $otels t$at (ri!ed s"stantiall# "elow t$eir !om(etitors
e'(erien!ed m!$ lower Re%0/Rs,