The Evolution of Revenue Management: Where it came from, and where it is going
By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | February 26, 2012
While hospitality based revenue management was originally designed to deal with mainly single and independent hotels, the product has evolved significantly to handle the rapid growth of the internet and third party booking sites. While once seen as a niche offering only used by certain parts of the market, revenue management now plays a major role in the operation of a successful hotel or resort.
Understanding the ability of revenue management to constantly evolve to meet the changing nature of the hospitality industry provides an insight into the many benefits that the product can provide to a hotel or resort with.
There is no better time to understand the durability and evolvement of revenue management as whole than during this current period of prolonged economic uncertainty. While many services and solutions provide great benefits to hotels in specific economic situations, such as during a stand along boom period or during a recession, revenue management is designed to evolve and meet the challenges of the times whatever they may be.
Revenue management in the hospitality industry was originally designed with a view to filling as many hotel rooms as possible, with no view to the long term effects of the pricing decisions undertaken. Many say that its original inspiration came from the American airline industry, which saw the need for more effective sales and pricing support solutions during the original period of airline competition which took place in the mid 1980's.
The hospitality industry was quick to see the wide ranging benefits of having such pricing and sales strategies in place, albeit in a basic and simplistic form compared to the modern day version we now see.
Hospitality based revenue management solutions were designed according to the most 'simple supply and demand economics' according to Neil Salerno, Hotel Marketing Coach (i). The original use of the product offering was designed to meet demand during particular times, whilst there was no real planning for the future as there is in today's industry.