Yield Management

Definition (Doughty et al 1995) A revenue maximisation technique aiming to increase net yield through the predicted allocation of available capacity to predetermined market segments at optimum price

Aims Maximise occupancy percentage during low demand Maximise average yield during high demand Increase business from price sensitive segments without reducing yield from existing customers

Preconditions Kimes (1989) Fixed capacity –cannot quickly adapt to demand segmented market –able to target offers to specific groups perishable inventory –must be sold on the day advance bookings irregular but predictable demand

Ingredients Market segmentation known patterns of demand and bookings knowledge of competitors prices ability to communicate price changes quickly overbooking policy

Problems Effects on secondary spend customer resentment –perceived fairness reduced role of employees –effect on incentives and commission is YM compatible –with good service –with relationship marketing? Commoditisation –encourages customers to ‘shop around’

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References Brotherton B and Mooney S ‘YM-progress and prospects’ International Journal of Hospitality Management 11, 1, Donaghy, K et al (1995) Yield Management, an overview International Journal of Hospitality Management 14, 2, Kimes, S.E. (1989) The basics of YM The Cornell Hotel and Restaurant Administration Quarterly November Kimes, S.E. (1994) The perceived fairness of YM The Cornell Hotel and Restaurant Administration Quarterly February 22-29