1. Yield management is a technique used in reservations, in a recent analysis by Donaghy et al(2008) the definition of yield management states that ‘Yield management is a revenue maximisation technique which aims to increase net yield through the predicted allocation of available bedroom capacity to predetermined market segments at optimum price’. This practice, used in almost all hotels, can be affected by many issues that can have a detrimental effect on profits, image and productivity.
2. Conceptually, yield management works within a framework set out by Jones and Lockwood (2005) who identified strategic operations as being concerned with the long term (focused on by head office), medium term (operations management) and the short term being handled by operational management (sales, front office, etc.). An issue with this however, is that such planning cannot always predict market conditions for the period, many hotels now allot rooms for use or sale (e.g. 50% of rooms kept unsold until a set date). This can tell the people in charge of yield management what a good price for the product is.
This can prove a very difficult balancing act for hotels, as many customers may have a more profitable stay for the hotel, but the chances of returning are far slimmer than another guest. In many cases, the short term yield is looked after more than the potential of a return customer, this in the short term increases profit, but risks losing a return customer. An example of this could be a couple on their honeymoon being preferred guests over a businessman who will be required to frequent the area many times, but with a shorter stay, the businessman may take his business elsewhere, or if accommodated for may bring much more revenue over a l...
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This study will make inferences by content analysis in line with “Analyzing the Use of an Advance Booking Curve in Forecasting Hotel Reservations” “Hotel reservation methods--a discriminant analysis of practices in English Hotels” “A comparison of forecasting methods for hotel revenue Management”. As well company information from annual reports (2014 and 2015) will be analyzed with regard to occurred reservation system failures to conclude recommendation for how capacity utilization and demand management can be enhanced by updating current reservation system with better forecasting capabilities.
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The economic theory of supply and demand dictates that an excess of supply (hotels) to demand (customers) leads to a lower price consumers are willing to pay. This creates inelasticity within hotel pricing and places substantial pressure on management to meet the pricing needs of customers while providing an attractive and unique service. Hotel services are also intangible in nature, placing increased burden on hotel owners to utilise all available rooms through discounts and deals.
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The lodging industry has seen improvement since the economic downturn of late 2007. There are factors beyond the industries control that could stifle growth in the industry, including but not limited to the still weak global economy and governmental breakdown. Since 2010, the industry has seen steady growth in average daily room rate (ADR), revenue per available room (RevPAR), revenue and net income. The have either reached or almost reached pre-downturn (2007) rates. Room construction in much of the United States has also started to rise again but at a slower rate than the financial indicators.
Thanks to these factors, pricing becomes one of the primary uses with which hotels attract customers. However, due to customers’ independent nature, there influence over industry players is limited. In the high-end segment of hotels, price influence becomes even less as hotels find it easier to differentiate themselves from the competition and customers become less price sensitive coming to expect higher prices as a symbolism of superior quality and services. Lastly, corporate business and tour operators can exert more influence due to their large purchases but this affect is of a limited nature and does not extend across the whole
b) Managers – that they have very little to no control over their property or employees. It seems like many important decisions have been taken away from managers, and they can not react in the best interest for the hotel chain because what’s in the customer’s best interest is usually not the same as the company’s best interest.
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