By Dr Angela Chu
Revenue Management (RM) originates from airline Yield Management (YM). Many people think that American Airlines (AA) was the first to adopt YM. However, YM was actually started by British Airways, with an employee of the British Overseas Airways Corporation, Ken Littlewood, who had established the idea of fenced prices and forecasts on seat inventory.
Littlewood proposed the revenue maximisation model by making use of the historical booking information obtained from the reservation system. AA took Littlewood’s rule on pioneering true yield revenue management a step further. And seeing their success, many other industries followed, including hotel and cruise lines.
In December 2022, I attended the RevME conference in Amsterdam, organised by the Revenue Management and Pricing in Service Sectors (REMAPS). The conference sees many internationally acclaimed academics and industry professionals sharing RM insights and best practices.
At the conference, Maarten van der Lei, Senior VP from Air France KLM, talked about their team set-up, the impact of COVID, the value propositions, and the competitive and commercial airline value chain. Sigrid Geldermans, previously employed by Marriott Europe and currently an advisor to the VP at FedEx, focused on airline cargo in her talk. Geldermans explained a shipment’s journey: hub & spoke, from the point of parcel pickup to the destination, covering all means of transportation, not limited to air but the ground network too. Her talk reminded me of my current research project on cruise RM and the complexity of the network system of a “moveable resort hotel on the sea”, a combination of hotel accommodation, F&B, transportation, and artificial theme park (in the case of mega-ships).
Of course, there is much more research about various forecasting methods, the difference between available and accessible data, and how we can understand our customers better. This is a step further in opening the Blackbox.
If you want to know more about RM, join my Hotel Revenue Management short course this spring! Click here to learn more and apply.