Yield Management
Reports
YIELD MANAGEMENT
The
CHR
Center for
Hospitality Research at Cornell University
CHR Reports is produced for the benefit of the hospitality industry by the Center for Hospitality Research at Cornell University
Cathy A. Enz, Executive Director
Glenn Withiam, Director of Publications Services
Copyright © 2001 by Cornell University
2 • Center for Hospitality Research at Cornell University
The “4-C” Strategy for
Yield Management
Executive Summary
Yield management is the umbrella term for a set of strategies that enable capacity-constrained service industries to realize optimum revenue from operations. The core concept of yield management is to provide the right service to the right customer at the right time for the right price. That concept involves careful definition of service, customer, time, and price. The service can be defined according to the dimensions of the service, how and when it is delivered, and how, when, and whether it is reserved. Timing involves both the timing of the service delivery and the tining of when the customer makes known the desire for the service, whether by reservation or by walking in to the business. Price can be set according to the timing of the service, the timing of the reservation, the type of service, or according to other rules that seem appropriate. Finally, the customer can be defined according to demand characteristics relating to the service, the timing, and the price. The ideal outcome of a revenuemanagement strategy is to match customers’ time and service
characteristics to their willingness to pay—ensuring that the customer acquires the desired service at the desired time at an acceptable price, while the organization gains the maximum revenue possible given the customer and business characteristics.
The strategic levers of yield management can be summarized as four Cs: namely, calendar, clock, capacity, and cost. They are bound together by a
YIELD MANAGEMENT
The
CHR
Center for
Hospitality Research at Cornell University
CHR Reports is produced for the benefit of the hospitality industry by the Center for Hospitality Research at Cornell University
Cathy A. Enz, Executive Director
Glenn Withiam, Director of Publications Services
Copyright © 2001 by Cornell University
2 • Center for Hospitality Research at Cornell University
The “4-C” Strategy for
Yield Management
Executive Summary
Yield management is the umbrella term for a set of strategies that enable capacity-constrained service industries to realize optimum revenue from operations. The core concept of yield management is to provide the right service to the right customer at the right time for the right price. That concept involves careful definition of service, customer, time, and price. The service can be defined according to the dimensions of the service, how and when it is delivered, and how, when, and whether it is reserved. Timing involves both the timing of the service delivery and the tining of when the customer makes known the desire for the service, whether by reservation or by walking in to the business. Price can be set according to the timing of the service, the timing of the reservation, the type of service, or according to other rules that seem appropriate. Finally, the customer can be defined according to demand characteristics relating to the service, the timing, and the price. The ideal outcome of a revenuemanagement strategy is to match customers’ time and service
characteristics to their willingness to pay—ensuring that the customer acquires the desired service at the desired time at an acceptable price, while the organization gains the maximum revenue possible given the customer and business characteristics.
The strategic levers of yield management can be summarized as four Cs: namely, calendar, clock, capacity, and cost. They are bound together by a
Links: Quarterly, Vol. 41, No. 1 (February 2001), pp. 120–127. 38, No. 2 (April 1997), pp. 32–43. Administration Quarterly, Vol. 38, No. 5 (October 1997), pp (August 1998), pp. 15–19. 5 (October 1998), pp. 41–48. at Your Hotel,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 39, No. 6 (December 1998), pp. 71– 79. 40, No. 2 (April 1999), pp. 76–83. Administration Quarterly, Vol. 40, No. 3 (June 1999), pp.