Yield Management: Editorial Introduction
- PDF / 81,155 Bytes
- 2 Pages / 595 x 842 pts (A4) Page_size
- 54 Downloads / 194 Views
#1999 Operational Research Society Ltd. All rights reserved. 0160-5682/99 $15.00 http://www.stockton-press.co.uk/jors
Yield Management: Editorial Introduction I Yeoman1, A Ingold2 and SE Kimes3 1
Napier University, Edinburgh, UK, 2Birmingham College of Food, Tourism & Creative Studies, UK and 3Cornell University, USA ``Yield Management, which involves the allocation of seats to different classes of customers (paying different prices) has produced signi®cant improvements in load factors and revenues for airlines and represents a major success for OR'' Ormerod1
According to the popular press and media a common discussion point amongst customers of service industries is why one person is charged more than another for what is apparently the same service or product. Typical anecdotal questions include `Why is the passenger in the next seat on an aeroplane paying less than half of the fare that I have been charged?' or `Why is it costing me £70 to travel to London from Birmingham on the train when the passenger across the aisle has a ticket that cost only one quarter of this?' The answer to this perceived unfairness is usually due to Yield Management (YM), sometimes also called revenue optimisation. Given that service organizations operate in a wide range of markets which are composed of widely ranging elements that are expressed to differing degrees, then to de®ne optimum pricing for any given service, in any set location and at a particular time provides a considerable challenge for members of the operational research community who may be involved. The problem has been expressed as one of matching a probabilistic demand to a set of ®nite resources in a manner that will optimise pro®t. When a company is constrained by capacity, ®nancial success is often determined by management's ability to exploit the capacity ef®ciently. The effective use of capacity is essential in capacity-constrained ®rms such as airlines, hotels and train-operating companies. In order to unlock and manage this process, an operational research approach is needed where the modelling of scenarios involves thousands of decision variables. These variables involve decisions about competition, cancellation rates, variable pricing and duration. YM2 had its origins in the deregulation of the US airline industry, although it is dif®cult to pinpoint an exact time for its inception. The major airlines, American, Delta, PanAM, United and Continental, came under pressure in terms of capacity management from a new `start-up' airline Ð PeopleExpress. This new airline began operating a `nofrills' service out of the unfashionable Newark Airport (near New York) at unbeatably low prices to a number of high volume destinations. American eventually countered this competition by the use of a form of price discrimination. They offered some seats at a price which was lower
than that which PeopleExpress could match economically, but maintained higher fares for those passengers who were willing and able to pay more. In this way, American were able to draw the low-spend p
Data Loading...
