1 / 7

Quantitative Material from 2 nd Lecture

Quantitative Material from 2 nd Lecture. Revenue Management Systems Services that are most amenable to revenue management systems (RMS), also called yield management , have one or more of the following characteristics:. Perishability. Segmented markets. Advance sales of the service.

chun
Download Presentation

Quantitative Material from 2 nd Lecture

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Quantitative Materialfrom 2nd Lecture

  2. Revenue Management Systems • Services that are most amenable to revenue management systems (RMS), also called yield management, have one or more of the following characteristics: • Perishability. • Segmented markets. • Advance sales of the service. • High fixed costs relative to variable costs.

  3. Basic Hotel Customer and Economic Information for One Day

  4. Contribution to profit and overhead ($) = (PB - VC)*DB+(PC -VC)*DC = ($140 - $20)*300 + ($80 - $20)*700 = $36,000 + $42,000 = $78,000 Hotel Management Effectiveness= (Actual prices for each room night)*(Actual number of room nights rented)/(Maximum legal price for each room night)*(Maximum number of room nights available in hotel): Hotel Management = ($140*300 rooms) + ($80*700 rooms) Effectiveness (%) ($180*350 rooms) + ($100*800 rooms) $42,000 + $56,000 = $98,000 = 68.5% $63,000 + $80,000 $143,000

  5. Revenue Management Systems • Overbooking is accepting more reservations than capacity available, assuming that a certain percentage of customers will not show up or cancel prior to using the service.

  6. A regional airline that operates a 50-seat jet prices the ticket for one popular business flight at $250. If the airline overbooks the reservations, overbooked passengers receive a $300 travel voucher. The airline is considering overbooking by up to 5 seats, and the demand for the flight always exceeds the number of reservations it might accept. The probabilities of the number of passengers who show up is given in the following table: A representative calculation for 51 reservations is [i]$250*(45*.08 + 46*.13 + 47*.18 + 48*.15 + 49*.25 + 50*.11) – $300*.1 = $10,717.50 The results below show that it is not profitable to overbook

More Related