HTM 3120 Lecture Notes - Lecture 18: Yield Management, Capacity Utilization, Demand Curve

• School: University of Guelph
• Department: Hospitality and Tourism Management
• Course: HTM 3120
• Professor: Mark Holmes

Document Summary

Optimization of profit by jointly maximizing capacity utilization and average price. Given a downward sloping demand curve (more people will buy if the price is reduced) a trade-off develops between the desire to obtain the highest average price and sell all available units of capacity. The manager"s problem is to know which combination of prices and volume for the same product will optimize revenue. Fixed capacity (short medium term: difficult to adjust to fit current demand. High fixed costs: urgency to utilize existing capacity. Variable (but predictable) demand: advance selling (reservations, cyclical demand, duration and intensity, expenditure level. Charge different prices for the same product or service while simultaneously selling as much capacity as possible. No customer who is willing to pay a higher price is denied due to the prior sale of a room at a lower price. Pricing tools: general pricing, demand-based pricing, nested pricing.