Revenue Management for Better

Profitability
Yield Management
 What is revenue management?

• Revenue management is the application of disciplined 

analytics that predict consumer behaviour at the micro-market
level and optimize product availability and price to maximize 
revenue growth.
• The primary aim of revenue management is selling the right
product to the right customer at the right time for the right
price and with the right pack.
• The essence of this discipline is in understanding customers'
perception of product value and accurately aligning product
prices, placement and availability with each customer
segment.
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• Taking it a step further, Robert Crandall, former Chairman and 
CEO of American Airlines, pioneered a practice he called 
yield management, which focused primarily on maximizing
revenue through analytics-based inventory control.
• Under Crandall's leadership, American continued to invest in
yield management's forecasting, inventory control and
overbooking capabilities.
• By the early 1980s, the combination of a mild recession and
new competition spawned by airline deregulation act (1978)
posed an additional threat. Low-cost, low-fare airlines like.
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• These fares were non-refundable in addition to being

advance-purchase restricted and capacity controlled.
This yield management system targeted those 
discounts to only those situations where they had a
surplus of empty seats.
• The system and analysts engaged in continual re-
evaluation of the placement of the discounts to
maximize their use. Over the next year, American's
revenue increased 14.5% and its profits were up
47.8%.
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• Marriott International had many of the same issues that
airlines did: perishable inventory, customers booking in
advance, lower cost competition and wide swings with
regard to balancing supply and demand. Since "yield" was an
airline term and did not necessarily pertain to hotels,
Marriott International and others began calling the practice
Revenue Management.
• The company created a Revenue Management organization
and invested in automated Revenue Management systems
that would provide daily forecasts of demand and make
inventory recommendations for each of its 160,000 rooms at
its Marriott, Courtyard Marriott and Residence Inn brands