 Ingredients |
Market Segmentation
Service industries should be able to determine their market
segmentation policy by customers willingness to pay. This
may lead to restrictions such as, advance purchase requirements
and cancellation penalties. The organisation must be able
to model consumer buying behaviour by customers willingness
to pay for a specific journey. By distinguishing between
different market segments, capacity constrained organisations
are able to identify the most appropriate customer for the
most appropriate unit of inventory.
Historical Demand and Booking Patterns
For a capacity constrained organisation to anticipate high
and low demand periods, detailed consumer buying behaviour
is essential. This information is held in the form of historical
demand and booking patterns is the cornerstone of accurate
forecasting.
Pricing Knowledge
Kimes (1997) describes RM as a form of price discrimination.
In practice, hotels and airlines operate RM systems which
depend on opening and closing rate bands. In order to stimulate
demand in periods of low demand, capacity constrained organisations
can offer discounted prices whilst during periods of high
demand low rates can be closed off. If hotels or airlines
price their inventory incorrectly, they can end up with too
few customers or too many customers of the wrong kind. Most
firms that practice Revenue Management rely on competitive
pricing methods. Airlines use reservations systems and global
distributions systems (Russell & Johns 1997) to communicate
and track information about price. At a local level, hotels
typically call each other to check on availability and price.
Overbooking Policy
Overbooking is an essential RM technique, particularly in
the hospitality & tourism industries. Overbooking levels
are not set by chance but are determined by a detailed analysis
of what has happened in the past and a prediction of what
is likely to happen in the future. Predicted no-shows, cancellations,
denials all form part of a complex calculation carried out
in advance. In this way the risk of disappointing a customer
who has booked in advance is minimised. Overbooking policy
is a means of managing the uncertainty of arrivals. The key
to a successful overbooking policy is to obtain accurate
no-show and cancellation information and develop overbooking
levels that will maintain an acceptable level of service
(Kimes & Chase 1998).
Information Systems
Effective management information is essential for successful
RM whether the hotelier is operating a manual or computerised
system. However, information technology can assist greatly
in the sorting and manipulation of required data. The use
of Artificial Intelligence (AI) has enormous potential for
handling the complexities of RM because of its abilities
in complex problem solving, reasoning, perception, planning
and analysis of extensive data Expert Systems (ES) (Russell
1997, Peacock 1994, Bradley & Ingold 1993) are 'knowledge
based' software packages that reflect the expertise in the
area of the application and these type of systems have extensive
capacity in dealing with non-numeric, qualitative data. Great
advances have taken place in the development of such systems
within Operational Research in order for capacity constrained
organisations to answer the question of profit optimisation.
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