Evolve from Yield Management to Revenue Management

Yield management, now called revenue management, evolved out of the deregulation of the airline industry and the introduction of competition with low-cost fares in the early 1980s. The push was to find a way to optimize prices for services or products that has a fixed inventory or is perishable, such as seats on a plane.?

Now, revenue management is critical to the financial success of many organizations, especially in the hospitality industries, where organizations need to manage pricing with a constrained supply over time and maximize revenue.

What is Yield Management?

Yield management is essentially an earlier term for revenue management and refers to the strategy or tactics used to manage the capacity assigned to different fare classes while maximizing revenue. To break that down, it’s a series of rules to determine how many units are in each fare class, and for how long. Typically, there are certain business environments when revenue management is applicable:

1. The service or product is a fixed inventory and is perishable.
2. Customers buy stock ahead of time
3. There is a set of fare classes, and each fare class has a fixed price
4. The availability of fare classes changes over time based on booking controls

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