Many Revenue Management experts often use the terms Yield Management and Revenue Management as if they were perfectly equivalent, however, despite having similar origins, there are clear differences between the two.
Yield Management:
It began in 1978 with the liberalization of prices in the United States airline industry, when American Airlines implemented a rate system that consisted of offering lower prices to those who booked three months in advance, higher prices as it approached the day of flight departure and special last minute offers that were announced only moments before the plane took off.
This price management system allowed American Airlines to achieve high profits and stay afloat in the face of fierce competition from other airlines.
The English term Yield means: yield or profit
As Yield Management was implemented, new needs arose, such as understanding consumer behavior and more accurately predicting purchasing patterns.
Revenue Management:
In 1996 American Airlines introduced a computerized reservation system called SABER, which allowed it to control the reservation inventory. Using this software saved him 1.4 billion in three years; This is why technology and the application of Revenue Management go hand in hand today.
Hotels as well as airlines and other service companies face the problem of fixed capacity, so if they want to sell the rooms at the highest rate, they will find that they will not be able to cover all the places, and if for On the contrary, they make their rooms cheaper, they will lose income that they could have obtained from those clients willing to pay the highest rate for the provision of good service (Kimes, 1989). It is in the midst of this dilemma that new techniques arise to optimize income through knowledge of the client and the forecast of how much they are willing to pay.
It was during 1990 when Yield & Revenue Management was introduced in the hotel industry and others such as vehicle rental. The hotels received help from the GDS (Global Distribution Systems), relying on e-commerce to place rooms and also to make a history and database to know consumer behavior and make forecasts of demand for each product or service, season and type of client.
As can be deduced from the previous paragraphs, the Revenue Management system includes some components that are not found in Yield Management, these are:
Market segmentation: for each type of product that is offered (eg: type of room), the proper segmentation of the type of customer that consume this type of product or service must be carried out.
Rate plan: as in Yield Management, it is necessary to create a rate plan. In the case of RM, this must be created after having segmented customers by type of product and service.
It is also very important to take into account the prices of the competition.
Forecasts or forecast: based on the historical data found in the management software we use, the sales forecast must be made according to each type of product or service and customer who consumes it.
In making the forecast, it is essential to take into account other external data, such as economic data from the countries of origin of our guests and clients, statistics of arrivals and spending of tourists in the destinations where our facilities are located, local events, etc.
The English term Revenue means: income, revenue, income.
According to Kimes (2000, 14) it is necessary to meet five requirements to be able to implement a Revenue Management system:
1.- Limited capacity
2.- Market segmentation
3.- Demand uncertainty
4.- Perishable inventory
5.- High fixed costs
RM is successfully used by a wide range of service industries including restaurants, casinos, clinics, show tickets, etc.
In conclusion, today, Yield Management is a very important part of Revenue Management, however, and unlike what many specialists say they are not the same. Some companies, such as the low-cost airline Vueling, currently apply a YM system since they do not segment the market, nor do they make demand forecasts for each of their routes. Others, such as Meliá, carry out rigorous studies on the buying behavior of their guests and forecasts on their sales and then apply the rates found in the price plan they have designed.
Bibliography
AndaluciaLab, webinar Revenue Management 1 to 5, www.youtube.com
Review of the literature, Chapter II, brief history about Yield Management, http://catarina.udlap.mx/u_dl_a/tales/documentos/lhr/perez_p_s/capitulo2.pdf
Tranter, Kimberly (2008), An introduction to Revenue Management for the Hospitality Industry, publisher: Pearson (Prentice Hall).
