Write 10 pages thesis on the topic revenue management in the hospitality industry. Soon the strategic planners realized that the hospitality sector is the industry that is either need-based or entertainment based. It is the sort of need where most of the time people are willing to pay as much amount as demanded. Then the industry adopted the revenue management system. Almost all the service industries are delivering value to the customers. Their aim is to maximize the value being delivered. They have the right to charge as much as the value they are delivering.
The revenue management system deals with the target of revenue maximization. Revenue management which is also known as yield management is to maximize revenue by setting different prices for every segment based on their willingness to pay. Different prices are also set depending on the different demand-supply of the markets. The more the customer is willing to pay, the more he or she is charged. In this way, business-related customers are always charged much higher than customers who are on leisure trips. It is based on the following theories:
Price discrimination theory deals with charging different amounts of price to different customers at different times. In order to achieve price discrimination, there are certain conditions that have to be met such as there should be customers having different elasticity of demand. A higher price can be charged if demand is inelastic because in case of inelastic demand customer is willing to pay as much as demanded such as if a person has got an important meeting which he or she cannot miss then he or she has a higher inelastic demand and would be willing to pay whatever is demanded [Riley, 2006]. In order to achieve price discrimination, there should be imperfect competition in the market that is there should be very few sellers or highly differentiated products. This condition is also true in the case of hospitality industry such as there are few hotels or airlines and if they are more in numbers than they provide highly .differentiated products such as special routes or packages.
