Revenue Management in the Travel Industry
During the past half-century, and especially during the past 30 years, the science of price optimization has advanced considerably. Beginning with the airlines, expanding to other segments of the travel industry and then beyond, many firms that invested in improving their pricing capabilities have reaped extraordinarily large rewards. This article provides a historical overview of why and how this transformation occurred within the travel industry.
Often misunderstood, this science known initially as yield management and then as revenue management has transformed the ways in which products are sold as well as how prices are set. Focusing initially on how many products to sell, given a set of prices that could be offered, the discipline now also includes finding the profit-maximizing price levels.
From a relatively obscure business practice 50 years ago, yield (or revenue) management has emerged as one of the most significant technologies to transform the profitability of travel companies. And had it not been for dramatic changes in the way airlines competed for business, it might never have happened. Here is that story.
by Warren H. Lieberman| Published Online 14 Jan 2011