TABLE OF CONTENTS Yield management (YM) is a management tool or technique which is currently being utilized by an increasing number of group- and independently owned hotels in order to maximize the effective use of their available capacity and ensure financial success. YM is not entirely new, and most hoteliers practice some form of YM, such as the adjusting of room rates to temper fluctuations between peak and off-peak seasons, mid-week, and weekend rates. This chapter, therefore, examines the use and application of YM in the hotel industry and hopes to demonstrate its ability to effectively maximize revenue and profit generation in this highly competitive and capital-intensive industry.
The airline industry has been credited with the development and refinement of YM following deregulation of the US airline industry in the late 1970s. The resulting heavy competition led to a price-cutting war with some airlines going out of business. Kimes (1997) cites the example of People's Express, which emerged briefly as a low-price, no-frills airline. In response, large carriers such as American and United began to offer a small number of seats at even lower fares whilst maintaining the higher-priced fares on the remainder of the seats. This strategy allowed American and United to attract the price-sensitive customers and still retain their high-paying passengers. As a result, People's Express went into bankruptcy. Consequently, YM was introduced as a method of utilizing capacity and maximizing revenue or 'yield' where airline companies sought to...
