DOLLARS AND SENSE: CONTRASTING REVENUE MANAGEMENT APPROACHES IN FULL-SERVICE HOTELS BETWEEN THE US AND CANADA

Abstract

Revenue Management (RM) is a strategic approach that involves the allocation of the right capacity to the right customers at the right price to optimize revenue or yield. In the context of the lodging industry, where the primary product is rooms, the concept of "perishability" plays a critical role. If a hotel room remains unsold for a given day, the revenue potential is lost forever, as unsold rooms cannot be carried over for sale on subsequent days. To address this challenge, effective strategies are essential to maximize room revenue through various marketing and sales techniques.

The concept of perishability is not unique to the lodging industry; the airline industry faces a similar scenario. In the airline industry, when an aircraft takes off with unsold seats, the revenue opportunity for those seats is lost forever. Given the structural similarities between these industries, Revenue Management quickly gained recognition as a pivotal tool in operations management for lodging establishments.

In the context of hotel rooms' perishability, continuous monitoring of market conditions becomes imperative. Factors such as shifts in demand and changes in consumer preferences require ongoing assessment. Consequently, lodging establishments need to employ a variety of tactics, including product bundling, pricing strategies, capacity allocation, forecasting methods, and adjustments to distribution channels, to ensure the maximization of revenue.

This study delves into the dynamics of Revenue Management within the lodging industry, emphasizing the importance of adapting to the perishable nature of hotel rooms. The research examines how strategies such as pricing, capacity allocation, and distribution channel adjustments are deployed to enhance revenue optimization. By exploring these strategies, the study aims to shed light on how the lodging industry harnesses Revenue Management techniques to navigate the challenges posed by perishable room inventory.