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Revenue Marketing and its Application Within the Hospitality Industry: History and Future Development

In: Pricing Perspectives

Author

Listed:
  • Miguel B. Baltazar

Abstract

Revenue Management (RM) is concerned with demand-management decisions and the methodology and systems required to make them (Talluri and Van Ryzin, 2004). RM is specifically about the determination of both the profit-maximizing prices and the optimal allocation of inventory-constrained products to different customer segments. The progenitors of the application of this science were the airlines, and in particular American Airlines (AA). In 1989, American Airlines, under the leadership of Robert “Bob” Crandall, began to use one of the first Yield Management systems. Smith, Leimkuhler, and Darrow (1992) quotes Crandall as saying, “We estimate that RM has generated $1.4 billion (US dollars) in incremental revenue for American Airlines in the last three years alone. This is not a one-time benefit. We expect RM to generate at least US$500 million annually for the foreseeable future. As we continue to invest in the enhancement of DINAMO (Dynamic Inventory Allocation and Maintenance Optimizer system) we expect to capture an even larger revenue premium.”

Suggested Citation

  • Miguel B. Baltazar, 2008. "Revenue Marketing and its Application Within the Hospitality Industry: History and Future Development," Palgrave Macmillan Books, in: Sandra Rothenberger & Florian Siems (ed.), Pricing Perspectives, chapter 8, pages 175-205, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-59489-0_8
    DOI: 10.1057/9780230594890_8
    as

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