Lesson 1.2 Yield Management in the Hospitality Industry
Summary
TLDRThe 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.
Outlines
🚀 Introduction to Yield Management in the Hospitality Industry
The script discusses the adoption of yield management practices from the airline industry by other sectors, notably the car rental company Hertz in the early 1980s. Marriott International was a pioneer in adapting yield management for the hospitality sector in 1989. The hospitality industry faces similar challenges as airlines and car rentals, such as demand seasonality, perishable inventory, and the need for purchase before consumption. Marriott recognized these similarities and implemented an adapted system known as revenue management, which includes optimizing the length of stay and meal duration. The company invested in automated revenue management systems that forecast demand and recommend inventory and pricing strategies based on various factors, including optimal rates and segment-specific rates. This approach also facilitated more effective targeted marketing. Over time, revenue management tools expanded to provide recommendations for negotiated and group rates. With the rise of online distribution in the early 2000s, revenue management began to consider distribution channels when determining the optimal price point.
Mindmap
Keywords
💡Yield Management
💡Hertz
💡Marriott International
💡Revenue Management
💡Seasonality of Demand
💡Perishable Inventory
💡Automated Revenue Management Systems
💡Length of Stay
💡Optimum Rates
💡Rate Per Segment
💡Negotiated Rates and Group Rates
💡Online Distribution
Highlights
Yield management was successful in the airline industry and quickly gained interest from other sectors.
Hertz was the first car rental company to implement yield management in the early 1980s.
In 1989, Marriott International adapted yield management for hospitality.
Marriott recognized similarities between hospitality industry challenges and those addressed by yield management in other sectors.
The adapted system in hospitality was called revenue management.
Revenue management in hospitality focuses on optimizing the length of stay and meal duration.
Marriott invested in automated revenue management systems and forecasting tools.
These tools calculated daily demand forecasts and made inventory recommendations based on length of stay.
Optimum rates and rates per segment were determined to optimize revenue.
Revenue management allowed for more effective targeted marketing efforts.
Revenue management tools historically optimized public individual rates.
Later, tools started providing recommendations for negotiated and group rates.
The development of online distribution in the early 2000s influenced revenue management.
Revenue management began considering distribution channels when recommending optimum price points.
The system helped to address the seasonality of demand, a common challenge in hospitality.
The system also addressed the issue of perishable inventory common in hospitality and food service.
Revenue management in hospitality led to more strategic rate offerings based on market segments.
The implementation of revenue management systems improved operational efficiency in the hospitality industry.
The success of revenue management in hospitality demonstrated its adaptability across different industries.
Transcripts
given the success of yield management in
the airline industry it rapidly caught
the interest of leaders from other
industries
hertz was the first car rental company
to implement the practice in the early
eighties in 1989 marit international
decided to adapt the system for
hospitality
marriott recognized that many of the
hospitality industry's challenges were
quite similar to those of other
industries that were employing yield
management as a solution
such as seasonality of demand purchase
before consumption and the issue of
perishable inventory
marriott international embraced an
adapted system that came to be referred
to as revenue management in the
hospitality industry
the main difference between yield
management employed by industries such
as airlines and car rental and revenue
management used in hospitality and food
and beverage is the additional need to
optimize the length of stay or duration
of a meal
marriott invested in automated revenue
management systems specifically
forecasting tools
those tools would calculate daily demand
forecasts and make inventory
recommendations based on length of stay
optimum rates and rates per segment
since the rate offering was based on
segments it also allowed for more
effective targeted marketing efforts
in the years that followed revenue
management tools which historically were
being used only to optimize public
individual rates
started providing recommendations for
negotiated rates and group rates
finally with the development of online
distribution in the early 2000s and the
related cost of sales increase
revenue management also began to take
into consideration distribution channels
while recommending the optimum price
point
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