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By:
David J. Wardell
Refining yield management techniques is a primary objective for most travel service vendors.
It's important enough to be among the most extensive “behind the scenes” automation
projects now in progress at most major airlines, many hotels, and several independent software
suppliers to the industry.
It's implications are widely appreciated in upper management circles, but it's application
occasions considerable controversy among travel providers, because it's one of those subjects
many would just as well you didn't understand too thoroughly and were unprepared to deal
with.
Yield management, minus polite trappings, is basically the combination of processes, analysis,
and techniques a vendor applies to the types of products it offers in order to induce (or compel)
its customers to pay as much as possible. Airlines employ yield management not only to keep
their airplanes full, but equally as important, to sell as many high priced seats as efficiently as
possible.
Hotels, likewise, want not only to fill rooms but to fill them at the best (meaning highest)
possible rate.
To be successful, these techniques are usually highly automated, because they entail difficult
and complex calculations, real-time monitoring of sold inventory, and constant updates. The
techniques can be quite basic (simple overbooking, however managed, is a form of yield
management), but the trend is decidedly toward the greater precision and reliability that comes
only from more sophisticated automation.
Yield is a complex word that can refer to profitability in a number of ways, but the essence of
being in business is to manage the greatest possible spread between costs and revenues.
Doing so means executing effective yield management.
It should be obvious that your mission as a travel agent is squarely in opposition to the
objectives of vendor yield management. If you sell your services as a “travel management”
company (not purely an order-taker), your sales focus is "managing" travel costs to minimal
levels for your customers, thereby minimizing the service vendor's cost/revenue spread as
thoroughly as possible.
Thus yield management is more effective (or at least easier) when you have as few skills and
other tools as possible that might enable you to circumvent it. Also, by implication, vendors
have little incentive to create or make those tools available to you.
Now I realize that yield management also entails making discounted inventory available for
certain travelers (those able to meet the tightly managed restrictions), thereby improving usage
levels and creating greater efficiency, but this definition misses the point. Limiting the
applicability of “discounted” inventory in any form means that some travelers are “destined” to
pay more than others.
David J.
Digitally signed by David J.
Wardell
DN: cn=David J. Wardell,
o=Technical Reality, ou,
Wardell
email=david@wardell.org,
c=US
Date: 2011.05.27 16:13:05
-04'00'
Yield Management: Understanding and Exploiting It © 1989. All Rights Reserved
David J. Wardell Page 3