Debunking the Myths of Yield Management

Abstract

Yield management (YM) uses information about customer purchasing behavior and product sales to develop pricing and inventory controls that produce greater revenues and deliver products that are better matched to the customers' needs. YM is not merely a set of mathematical techniques or a computer system, but a tool for managers' decision making. Computer-based tools can be a key component of a YM program, but such tools do not replace employee decision making and control. Instead they offer information to a firm's staff members so that they can make better decisions. For example, demand forecasting is basic to YM and enables a hotel to identify low-demand days far enough in advance to take appropriate actions. YM focuses on how much of a product to sell at established prices, but it does not determine what prices to charge or whether to change prices. Well-designed customer-service programs can minimize YM's effects on customer service. YM programs need not be complex, which is especially important in the lodging industry, where personnel turnover rates are high. The best way to implement YM depends on an organization's particular characteristics.