7/10/22, 2:03 PM Yield

Yield (Revenue) Management

Systems
Yield Management Systems/
Revenue Management Systems
Yield Management Systems (also known as Revenue Management
Systems) typically used in service industries that offer perishable goods, such
as
hotel rooms or airline seats.  Yield Management was first used by the
airline industry (United and American) after the airline deregulation. 
Yield
Management tries to leverage selling all the available inventory and
making the maximum profit possible.  Using the airlines as an example,
airlines
have a fixed number of seat available on a plane to a location. 
If a seat is not sold the airline loses the ability to ever make a profit on
that seat again. 
Yield Management attempts to sell all the seats at the
highest price possible.  However, it is not always possible to sell all of
the seat on the plane at
the same price.  Using yield management techniques
the prices for these seats may be discounted to entice people to buy the
seats.  The plane may
also be overbooked to assure that all the seats are
filled even if some people do not show up for the flight or cancel their
seat.  Yield management
systems attempt to use historical data and
specialized algorithms to determine the optimal price to sell the
inventory.  These systems can work in real-
time and change prices based on
demand.  There are some disadvantages to using these systems.  The
Yield Management systems to not discriminate. 
A frequent customer will not
be given preference, for example.  Also if the system cannot forecast well
it will not help maximize revenue.  Finally the
historical data needed to
forecast may not be available.  Despite these disadvantages, Yield
Management Systems are very popular in many service
industries.  They have
also been shown to provide large cost savings and improve revenue.  Several
companies provide these systems, some of which
are shown in the links later in
this page.

Why companies use yield

management systems
Revenue Management Systems Inc. defines the following reasons to
use a Yield Management System:

"Accurately assess future consumer behavior under

dynamically changing market conditions."

"Determine the most effective way to price and allocate

inventory to reach every future consumer, each and every day, making
real-time
adjustments as market conditions change, with the consumer in
real-time."

"Communicate this information instantaneously to

distribution and sale outlets which deal with the consumer in
real-time."

"Serve as a decision-support resource for marketing and

operational functions, including but not limited to: pricing, scheduling,
product
development, advertising, sales, distribution, human resource
utilization and capacity planning."

Characteristics that make a

company a good target for a yield management system
The following is a list, provided by www.itech2000.com,
that are typical characteristics of a Yield Management problem:

"Perishable inventory

Relatively fixed capacity

faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 1/7

7/10/22, 2:03 PM Yield

High fixed costs, low variable costs

Advance reservations

Time variable demand

Appropriate cost and pricing structure

Segmentable markets"

Industries that use Yield

Management Systems
Yield Management Systems are used in many industries, which
include:

Airlines

Hotels

Car Rental Agencies

Cruise Lines

Railroad

Television Broadcast

Telecommunications

Restaurants

Golf Courses

Links
General Yield/Revenue
Management Links
INFORMS Revenue
Management Sections -- This site contains among other things a list of
it's members, links to resources and a list of
presentations on revenue
management from the INFORMS meetings (more detailed then what I have
included).

Revenue
Management -- This site contains a basic definition and a link to
Revenue Management resources including books, articles,
consultants, and
companies that are using Revenue Management

faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 2/7

7/10/22, 2:03 PM Yield

International
Yield Management Research Site (warning: this site plays a very annoying
version of We Come from a Land Down Under)

What
is Revenue Management

Yield/Revenue
Management Links for Hotels

Hotel Online

Revenue
Management (RM) and it's Application to Different Industries -- Slides
by Steven Pnchuk

Revenue Management
-- A Class offered by MIT (gives a brief description of Revenue Management)

A
Mailing List for Yield Management

What Exactly is Yield

Management

Yield
Management

Yield
and Revenue Management Resource for Hotels to Maximize Profit

Understanding
Yield Management by David Wardell

Yield
Management

Yield/Revenue Management
Systems Providers
The following is a list of companies that provide Yield/Revenue
Management solutions.  The links here just take you to their home pages but
most of
them also have a "Papers" section that contains more
information on Yield/Revenue Management and related topics/implementations.

Sabre

Revenue
Management Systems Inc.

IDeaS

HP
Open Skies RMS

Maxim

Talus

Lufthansa
Systems Berlin

faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 3/7

7/10/22, 2:03 PM Yield

SH&E/SITA

INDETEC/PNR

PROS
Revenue Management

Profit
Optimization Strategies Inc.

ORTEC

ICL

Fujitsu
Revenue Management System

Easy
(EZ) Revenue Management Solutions

Yield
Management Werks

Resort
Data Processing

MICROS
Systems Inc.

Yield/Revenue Management
Systems Conferences
AGIFORS
2000 (The Airline Group of the International Federation of Operations
Research Societies) -- Annual Reservation and Yield
Management Study Group

Yield/Revenue Management
Systems Researchers
The following are past INFORMS sessions on
Yield Management.  This is a good place to look to find people who are
actively researching this area.

INFORMS Atlanta '96 -- Session

on Airline Yield Management

INFORMS Montreal '98 -- Topics

in Airline Revenue Management

INFORMS Montreal '98 -- New

Aspects in Revenue Management

INFORMS Atlanta '96 -- Emerging

Markets in Revenue Management

INFORMS Tel Aviv '98 -- Aviation

Applications

INFORMS Tel Aviv '98 -- Airlines:

Planning and Scheduling

faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 4/7

7/10/22, 2:03 PM Yield

INFORMS Atlanta '96 -- Section

on Aviation Applications

Other Researchers

University
of Connecticut School of Business -- Suresh K. Nair

Department
of Hotel, Restaurant, and Travel Administration -- University of
Massachusetts at Amhurst

Northwestern -- Ciyou
Zhu

Glascow Caledonian University -- John

Rodger

Management
Science & Operations Management Divison of Columbia Business School

Garrett
van Ryzin -- Columbia University

Informs Journal -- Transportation

Science

Yield/Revenue Management
Systems Papers/Books and Implementation Case Studies
"Airline
Alliances" -- October 1998 by Andrew Boyd in OR/MS Today

"Sabre
Soars" -- June 1998 by Thomas Cook in OR/MS Today

"Smarter
Revenue Management Systems" -- March 199 by Joan Marsan for Hotels

"Airline
Ties Profitability Yield to Management" -- Society for Industrial
and Applied Mathematics News

"United
Airlines' New Forecasting System Is Expected to Raise Annual Revenue"
-- IBM (Case Study focusing on technical implementation)

"United
Airlines' New Forecasting System Is Expected to Raise Annual Revenue"
-- IBM

"Shopping
for Revenue Management" -- Wireless Review

"Pricing
and Revenue Management – Driving Profit Improvement from CRM" --
Robert Phillips

"Sabre's
Challenge" -- Information Week Online

INDETEC/PNR
Case Studies

"Revenue
Management Systems "Must-Have" or Luxury?" -- Jon Inge on
Hotel Online

"Revenue
Management Isn't New But It Is Important" -- Kirby D. Payne on
Hotel Online
faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 5/7
7/10/22, 2:03 PM Yield

"Information
Technology As A Strategic Tool For Tourism And Hospitality Management In The
New Millennium" -- Dr. Dimitrios Buhalis

"The
Marriage of Category Management and Customer Management" -- Gary
Robins for Retail Info Systems News

"Airlines
Rely on Technology To Manipulate Fare Structure" -- Scott McCartney
for The Wall Street Journal Interactive

Yield
Management: Applications to Air Transport and Other Service Industries
-- Sylvain Daudel, Barry K. Humphreys, and George Vaille (on
amazon.com)

Yield
Management: Strategies for the Service Industries -- Ian Yeoman and
Anthony Ingold (on amazon.com)

Revenue
Management: Hard Core Tactics for Market Domination -- Robert G.
Cross (on amazon.com)

Yield
Management: The Leadership Alternative for Performance and Net Profit
Improvement -- Jeffery L. Magee

Hitting
a Moving Target: Setting Price Among Uncertainty -- Kathi Jean
Ali’varius (The Aviation Institute at George Washington University)

Property
Report: Your Room Cost $250.. No! $200...  -- Neil Templin for the
Wall Street Journal

"New
Business Models for Electronic Commerce" -- Dennis Viehland

Yield/Revenue Management
Systems in the News
Micros
Technology Acquires OPUS 2 Revenue Technologies, Inc. (a leading
supplier of hotel revenue management systems) -- October 1999

ICL
Partner with XACCT to launch IP Revenue Management Portfolio -- provides
a look at how revenue management can be used in the
telecommunication
industry

ICL
Launches Europe's First Telecoms Revenue Management Service -- also
provides a look at RM in the TC industry

"Vail
Resorts, Inc., Expands Yield Management Solution to Include Breckenridge
Resort" -- Hotel Online

"Talus
Solutions Launches Talus Solutions Revenue Management Suite" -- The
Auto Channel News

"New
Low-Fare Airline to be Quite High Tech" -- Stewart Deck for
Computer World

"In
the IS Driver's Seat at Budget Car Rent-a-Car" -- Chicago Software
News

"Hilton
Appoints Yield Management Partner" -- hotelmarketing.com

"Four
Seasons Hotels and Resorts Selects maxim Revenue Management System From
Talus and YMSI" -- businesswire.com

"American
Airlines Chief Crandall to Retire May 20" -- The Detroit News
faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 6/7
7/10/22, 2:03 PM Yield

Journal Article:
"Strategic
Service Pricing and Yield Management"  by Ramarao Desiraju and Steven
M. Shugan in the Journal of Marketing

faculty.bus.olemiss.edu/breithel/final backup of bus620 summer 2000 from mba server/Tabitha_James/yieldmgmt.htm 7/7