This article focuses on errors and misconceptions that clutter the literature on hotel yield
management. Using the basic tools of economics, it deals with three main topics. First, the
article shows that of the oft-quoted list of necessary conditions for yield management sys
tems, only perishable product is a true requirement. Second, the article discusses the mis
use of the price demand elasticity concept and how it is being confused with willingness to
pay. Third, the article discusses the reasons behind the observed increase in willingness to
pay as time draws closer to the date of stay It show that alongside the oft-cited explanation
that business travelers with higher willingness to pay book later, there is another consumer
behavior phenomenon that must not be ignored: Customers of any segment, even leisure
travelers, with a relatively low willingness to pay, are willing to pay more for the same room
as time nears the date of stay.
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