The Confusing Side of Yield Management: Myths, Errors, and Misconceptions

Abstract

This article focuses on errors and misconceptions that clutter the literature on hotel yield management. Using the basic tools of economics, it deals with three main topics. First, the article shows that of the oft-quoted list of necessary conditions for yield management sys tems, only perishable product is a true requirement. Second, the article discusses the mis use of the price demand elasticity concept and how it is being confused with willingness to pay. Third, the article discusses the reasons behind the observed increase in willingness to pay as time draws closer to the date of stay It show that alongside the oft-cited explanation that business travelers with higher willingness to pay book later, there is another consumer behavior phenomenon that must not be ignored: Customers of any segment, even leisure travelers, with a relatively low willingness to pay, are willing to pay more for the same room as time nears the date of stay.