Revenue Management In Hotel Industry

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TOPIC Write a Report that identifies explains and evaluates two important issues reported in the academic literature concerning the effective application of revenue (or yield) management in hotels in terms of their relevance to the management of this hotel. Abstract Revenue Management, which is originated in the 1970s in the US airline industry, has been widely used in the international hotel industry more so in recent years, because of rapid development of hotel industry and the increasingly fierce market competition. This report takes a radical approach to challenges faced by Hotel Industry for the successful implementation of Revenue Management. A central question regards the underlying impact of sharing economy platforms and this report…show more content…
This can be demonstrated in a number of situations, including customer reaction to high prices after a natural disaster or high room rates during an important sporting event (such as the Olympics or World Cup). Perceived fairness is strongly affected by the reference price and the reference transaction (Kahneman et al., 1986a, 1986b; Thaler, 1985). Reference price could be rack rate, the regular rate paid, the price paid the last time, or the price a friend paid. The reference transaction could be "calling the hotel directly is always cheaper" or that the prices on the hotel's Web site should always be cheaper than other Internet prices. When hotels use RM, they often alter the reference price and reference transaction, and if they do not carefully plan how they are going to present their pricing practices to customers, they may run the risk of customer dissatisfaction. The principle of dual entitlement (Kahneman et al., 1986a) states that customers believe that they are entitled to a reasonable price and that companies are entitled to a reasonable profit. When this relationship becomes unbalanced in favor of the company, perceptions of unfairness may occur. Based on their research on the principle of dual entitlement, Kahneman et al. (1986a, 1986b) found that (1) price increases are seen…show more content…
For existing hotels, the growth of ADRs will most likely be curtailed. The fluid nature of Airbnb supply suggests that historic price premiums realized during peak demand periods will be mitigated. We know by studying past hotel cycles that increased competition resulting from new supply can hurt a hotel’s ability to raise rates and can even cause management to lower their rates to stay competitive. The other impact may be on new hotel construction. Airbnb may be an impediment to traditional hotel construction and may reduce traditional hotel supply growth in many markets. This also may have the positive benefit of reducing the likelihood of overbuilding. Airbnb is here to stay. It is more relevant in some markets than in others. Airbnb has and will continue to encroach on the business of the traditional lodging

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