Importance of Revenue Management in Hospitality/Tourism Industry

The paper tells that revenue management allows an organization to offer the desired commodities at accurately determined prices to the targeted consumers through a well-designed supply chain for an organization to maximize its revenue. It is a concept that develops through a progression of stages as a business strives to accomplish the desired rate of revenue generation. The early stages in the development of revenue management involve research aimed at determining the type of customers that the organization intends to target. Market segmentation allows the business to organize its customers into groups with unique characteristics. The process of categorizing the customer needs incorporates the understanding customer needs. In a tourist firm, the process is very crucial because the organization must understand how competing firms intend to attract customers. In order to understand the needs of the customers, the organization consults prospective customers through various communication channels such as e-marketing, suggestion boxes as well as through one-on-one discussions with sales personnel. Once the customers have been consulted, the organization interprets customers’ needs correctly with regards to specifications and design, making it possible for the organization to provide operational definitions of output. Customer base refers to the grouped customers that an organization serves. It is mainly composed of regular customers that contribute a large portion of purchase over a given period of time. The eyeball approach is applied as a measure of actual and potential value for the customer base. The approach is based on the assumption that companies need to rapidly acquire customers so that they can grow. It also enhances the chances of the company to gain first mover advantage and also helps in the creation of network externalities which are very strong.