This website uses cookies to ensure you have the best experience. Learn more

Yield Management Essay

1255 words - 6 pages

Introduction

One of the most vital techniques which are so widely adopted by the servicing or hospitality to maximize profit is known as Yield Management. Industries such as airline industry or hotel industry tend to adopt this technique to allocate limited resources. Sometimes it is known as perishable asset revenue management or simply revenue management because it is also adopted by companies which deal with highly perishable goods or “services which cannot be stored at all” (Netessine, 2002). Kimes and Wirtz (2003) defined revenue management as “the application of information systems and pricing strategies to allocate the right capacity to the right customer at the right price at the ...view middle of the document...

The factor which determines what rate to charge the customers is judge by the sensitivity of customers towards price. Hotels utilize regulations which are acceptable to customers in order to identify guest who do not mind pay higher than others and those who are willing to change their actions to get a room at a lower rate. The most common example which we can witness is price sensitive consumers whom always try to get their room at a lower rate by complying with certain rules. These rules may include early booking (3 to 12 months earlier), accepting the fact that deposit will not be refund under the cancellation of the booking and limited room options.

On the other hand, guest who are willing to pay at the highest rate have the flexibility of booking their rooms at any time, with any choices available.

Dynamic Pricing Strategy

The method of adopting to differentiate price sensitive customers for profit maximisation purpose does not always serve its purpose. Often the prices are relatively stagnant in the early phase of the development of Yield Management. This is because yield management system can really be effective only when a hotel has a certain level of market demand, and when it has a range of rates available.

When hoteliers start to recognize the potential benefits which can be yielded from price discrimination method, they started to practice Dynamic Pricing approach. This approach aid the firm to maximise their profit and overcome the problem of inconsistent profitability. The approach is usually done by delaying its pricing selections until after market conditions are revealed so that the firm will be able to alter the price accordingly, for instance, when demand is high, set a high price, and when demand is low, set a low price (Cachon & Feldman, 2010).

[pic]

Figure 2: Basic Supply demand model (Jayaraman and Baker, 2009)

The figure 2 shows both demand and supply curve are constant. Also, the sales price and volume sold will be at the intersection of the supply and demand curve, ceteris paribus. Nevertheless, airline seating and hotel rooms are not ceteris paribus. There is a lead-time involved for increasing supply over a certain amount and the product cannot be kept for future use. Subsequently supply is rather fixed (Figure 3). But, seasonal variable or specific events will change the demand rapidly. When the demand increases, the equilibrium price increases and the price should increase. Opposite effect of equilibrium and price happen when demand is declines. The Sabre system (airlines) and central reservation systems (hotels) track changes in demand permits dynamic pricing. Each unit of the product will be sold at the highest price given by a buyer under the perfect circumstances of dynamic pricing. The following products will be sold at the next highest price until all products are sold (Figure 4).

[pic]

Figure 3: Model of supply and demand with short-term

supply fixed (Jayaraman and Baker,...

Other assignments on Yield Management

Preem Presentation Essay

601 words - 3 pages Refinancing with a new high-yield bond issue Tight credit markets in the U.S. and worldwide in 2009 signaled continued trouble for companies that needed to pay off or refinance debt in 2009 and onward.19 The financial crisis in 2008 had seen a virtual stop to high-yield issuance.20 The following year, there were some positive signs, and returns on high-yield debt had been very strong in 2009 as debt prices surged back from crisis lows. However

Management Essay

504 words - 3 pages MBA 503C Finance Management Christopher Skirvin Week 2 Discussion What is an opportunity cost and how can it be measured? An opportunity cost is the rate of return you could earn on an alternative investment or similar risk. It can be measured by the benefits of the investment you decide to make. Would you rather have a saving account that pays 3% interest compounded semiannually or one that pays 3% interest compounded daily

Financial Terms And Roles

487 words - 2 pages firm’s long-term investments is called capital budgeting. The mix of long-term sources of funds used by a firm to finance its operations is called its capital structure. Working capital management involves management of the firm’s short term investments in assets and liabilities and ensuring that the firm has sufficient resources to maintain its day-to-day business operations. Debt – Owner of a business is personally liable for the debts of that

Mission Mangement & Trust

982 words - 4 pages be more socially conscious and “green”. For example, the company I work for is very dedicated to United Way and they encourage the employees to donate and they will actually match all money donated by employees. While they are a public company driven by earnings and financial results, they still find benefit in charitable contribution and giving back to the community. I think they would find a company like Mission Management and Trust a perfect match with their own strategic vision. It is possible to yield success with traditional investors and could probably land contracts with major corporations who believe in the same strategic vision.

Indian Economy

414 words - 2 pages Travel. OR techniques are used by airlines and rail companies to offer varying fares and make higher revenues by filling more seats at different prices - an OR technique known as Yield Management. All airlines depend on the effective use of OR techniques to make them operate at a profit. Retailing. In supermarkets, data from store loyalty card schemes is analyzed by OR groups to advise on merchandising policies and profitability improvement. OR

Cisco Systems

2628 words - 11 pages | | | | | | | Cisco Systems Ratios | Dell Ratios | ASSET MANAGEMENT RATIOS | 2009 | 2010 | 2011 | 2010 | Inventory Turnover Ratio | 33.63 | 30.17 | 29.08 | 51.10 | DSO | 32.11 | 44.93 | 39.68 | 38.54 | Fixed Assets turnover ratio | 8.93 | 10.16 | 11.04 | 31.49 | Total Assets turnover ratio | 0.53 | 0.49 | 0.50 | 1.10 | | | | | | | Cisco Systems Ratios | Dell Ratios | DEBT MANAGEMENT RATIOS | 2009 | 2010 | 2011 | 2010 | Debt Ratio | 43

360 Employment

534 words - 3 pages 360 degree changed employment development and increased overall performance in the workplace.360 relates to Human Resources because it teaches the basic components of leadership. One can learn a great deal from the Alliance Unichem group such as how to handle conflict management, negotiation while understanding diverse perspectives of interpersonal communication. Human Resource Management is the function within an organization that handles the

Productivity

1386 words - 6 pages improvements more difficult to achieve. Nevertheless, because service is becoming an increasingly large portion of our economy, the issues related to service productivity will have to be dealt with. It is interesting to note that government statistics normally do not include service firms. A useful measure closely related to productivity is process yield. Where products are involved, process yield is defined as the ratio of output of good product (i.e

Final Exam

434 words - 2 pages 11) In the development of a SFAS matrix, the first step is to A. enter the ratings of how the company's management is responding to each of the strategic factors B. calculate the weighted scores C. list the most important EFAS and IFAS items D. indicate short-term for the duration E. enter the weights for all of the internal factors 12) The technique that illustrates how management can match the external

Marketing

305 words - 2 pages Compare the applicability of the easyGroup business model in the airline industry and the cinema industry (examine Exhibits 8 and 18, among others). What problems do you see for the cinema business? The business model of easyGroup, a concept embodying low costs, no-frills, maximization of the capacity and utilization rate, and price yield management was taken from easyJet and applied to easyCinema. Despite the fact that in the airline industry

Business Accounting Formulas

302 words - 2 pages | |EFFICIENCY |Fixed assets turnover |Sales / Fixed assets at NBV (x) | | | | | |OR ASSET MANAGEMENT |Total assets turnover |Sales / Total assets at NBV (x

Similar Documents

Maize Yield From Arable Essay

498 words - 2 pages What was the food and portion siz you chose?   1 medium size banana.   2. Describe its comosition in terms of carbohydrates, lipids, and proteins.   The carbohydrates that are in one medium banana re 26.95, the lipids (fat) is 0.39, and the protein is 1.29.   3. How many calories are in your food item?   There are 105 calories in a medium banana.   4. List some of the most common vitamins and minerals in this food item.   Calcium

Money Market Mutual Funds Essay

332 words - 2 pages rate, commissioning a capsize carrier for 15 years and then scrapping it as is company policy would ultimately yield a NPV of (1,252,916). However, if Ocean Carriers decided to commission its ship for 25 years, then the NPV would be a positive 368,557. Since current company policy is to scrap ships after 15 years, management should look at these numbers in detail and consider revising its dated policy. As mentioned above, this recommendation

Chapter 5 Solution Essay

6798 words - 28 pages in jail. ANSWERS TO END-OF-CHAPTER QUESTIONS 5-1 a. A proxy is a document giving one person the authority to act for another, typically the power to vote shares of common stock. If earnings are poor and stockholders are dissatisfied, an outside group may solicit the proxies in an effort to overthrow management and take control of the business, known as a proxy fight. A takeover is an action whereby a person or group succeeds

Project Cost Management And Global Challenges

539 words - 3 pages understand the business environment of the companies, without having to spend much time. This is because comparing the cost management techniques would then yield the desirable outcomes. The article also states the difference in the terms used for cost management is another hindrance towards the implementation of efficient project cost management techniques. (Smith, 2014). The above mentioned methodologies can help in framing a sound and