Lesson 1.2 Yield Management in the Hospitality Industry

Summary

The transcript discusses the adoption of yield management practices from the airline industry by other sectors, notably Hertz in car rental and Marriott in hospitality. Marriott adapted yield management into revenue management, focusing on optimizing length of stay and meal duration. They invested in automated systems for forecasting demand and inventory, targeting marketing, and pricing strategies. As online distribution evolved, revenue management also considered distribution channels to determine optimal pricing.

Takeaways

• 🛫 Yield management was first successful in the airline industry.
• 🚗 Hertz was the first car rental company to implement yield management in the early 1980s.
• 🏢 Marriott International adapted yield management for hospitality in 1989.
• 🏨 Hospitality industry challenges, such as seasonality and perishable inventory, are similar to those in other industries.
• 💼 Marriott's adapted system was called revenue management in hospitality.
• 📊 Revenue management optimizes the length of stay and meal duration, a unique aspect for hospitality.
• 💻 Marriott invested in automated revenue management systems and forecasting tools.
• 📈 These tools calculated daily demand forecasts and made inventory recommendations based on various factors.
• 🎯 The system allowed for more effective targeted marketing based on rate offerings segmented by customer type.
• 📊 Revenue management tools evolved to optimize negotiated and group rates.
• 🌐 With the rise of online distribution in the early 2000s, revenue management started considering distribution channels for pricing.

Q & A

What is yield management?

Yield management is a strategy used in industries such as airlines and car rentals to maximize revenue by optimizing the price and availability of goods or services based on demand.

Why did the airline industry's yield management practices attract attention from other industries?

The success of yield management in the airline industry demonstrated its effectiveness in maximizing revenue, which led leaders from other industries to consider adopting similar practices.

Which car rental company was the first to implement yield management?

Hertz was the first car rental company to implement yield management in the early 1980s.

In what year did Marriott International decide to adapt yield management for hospitality?

Marriott International decided to adapt yield management for hospitality in 1989.

What challenges in the hospitality industry are similar to those in other industries employing yield management?

The hospitality industry faces challenges such as seasonality of demand, purchase before consumption, and perishable inventory, which are similar to those in other industries using yield management.

How did Marriott International adapt yield management for the hospitality industry?

Marriott adapted yield management by embracing a system referred to as revenue management, which included optimizing the length of stay or duration of a meal in addition to maximizing revenue.

What tools did Marriott invest in to support their revenue management system?

Marriott invested in automated revenue management systems, specifically forecasting tools that calculated daily demand forecasts and made inventory recommendations.

How did Marriott's revenue management system optimize rates?

The system optimized rates by calculating daily demand forecasts, making inventory recommendations based on length of stay, optimum rates, and rates per segment.

How did Marriott's revenue management system facilitate targeted marketing efforts?

The system allowed for more effective targeted marketing efforts by basing rate offerings on segments.

What changes occurred in revenue management tools over the years following Marriott's implementation?

Revenue management tools evolved to provide recommendations for negotiated rates and group rates, in addition to optimizing public individual rates.

How did the development of online distribution in the early 2000s affect revenue management?

With the development of online distribution, revenue management began to consider distribution channels while recommending the optimum price point, in response to the related increase in cost of sales.