Conditions of Revenue Management

Topics: Tourism, Pricing, Price discrimination Pages: 4 (1371 words) Published: January 2, 2013
Business Condition
Transatlantic passenger ships are nearly killed off by the air travel. However, marine passenger transportation is still flourishing in the form of cruise ship (Marc, 1989, p.38). According to the Cruise Line International Association (CLIA, 2005), more than 100 million North Americans took cruise between 1980 and 2004. Besides, the average annual passenger growth rate of cruise line industry is 8.2 percent due the cruise industry report (Mazzarella& Ji, 2007, p.20), which indicates that cruise industry becomes one of the fastest growing sectors in the leisure travel market. Additionally, the cruise industry has grown as new markets that are developed and new ships are particularly designed for the specific cruise destination (Marc, 1989, p.38). Precondition

The application of revenue management is not appropriated in all the industries. According to Kimes (1989), successful industry to apply revenue management must fit with RM characteristics, which in terms of perishable inventory, fixed capacity, market segmentation, advanced sales, low marginal costs and time-variable demand (cited in IDeaS, 2005, p.4). Kimes developed a typology model of revenue management as figure1, which includes two strategic levers of duration and price. Cruise industry would be suitable and be really successful to apply revenue management as both the capacity and duration are managed (Kimes, 2000, p.6). Kimes (1989, 1998) and Cross (1998) together complement five “necessary ingredients” for the successfully implementation of Yield management, which in terms of “ market segmentation, historical demand and booking pattern, pricing knowledge, overbooking policy and information systems.” However, Schwartz’s (1998) state that the key elements in yield management actually is only perishability of the product and customer’s willingness to pay (cited in Julian, 2000, p.295), which indicates Kimes and Cross are overstated. Conversely, Julian (2000) points out that...
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