Combining Hotel Promotions,Discount Packages,and Yield Management Systems: Make Sure It's Legal

Abstract

Fierce competition abounds, extreme market segmentation is prevalent, and occupancy levels and profits are down throughout the hotel industry. As a partial response to these problems, the hotel industry has made significant changes in methods used to quote room prices and in the sale of its rooms through central or local reservation systems.

To maximize revenue, many hotels have implemented yield management systems that adjust "room rates in response to the level of rooms booked for future arrival dates" (Relihan, 1989). Computer systems, sales incentive programs, and the retraining of reservation personnel and others are necessary in order to produce "the best possible return, or yield, from the space available" (Relihan, 1989). While the hotel management is attempting to boost revenues, they may be simultaneously and actively promoting discount programs to attract weekend guests, seniorcitizens, corporate accounts, government contracts, and families.

Potential guests often respond to advertisements for reduced rate rooms and discount packages by calling the hotel reservation system. Seeking the advertised discount rate, they may come up against a newly installed yield management system whose purpose is to maximize revenue.

This article will focus on yield management systems, some of the problems that have been recognized in the sale of advertised rooms at discount prices, and existing federal and state statutes regarding unfair and deceptive acts and practices. It will also examine how some in hotel management may be unknowingly violating these statutes. In addition, some basic concepts are presented to avoid illegal pricing and reservation practices. Key Words: yield management, discounting, hotel industry, legal issues.

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