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Revenue Management

Revenue Management. The origin of Revenue Management Roberto Alvarez López Rooms Division Management. July 2010. Revenue Management. Where did RM come from ?. The airline Industry in the 70’s The airlines offered standard prices.

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Revenue Management

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  1. Revenue Management Theorigin of Revenue Management Roberto Alvarez López Rooms Division Management July 2010

  2. Revenue Management Wheredid RM come from? TheairlineIndustry in the 70’s Theairlinesofferedstandardprices Ifyoufindthesamepricesforthesameproduct… How do you pick yourchoice?

  3. Revenue Management Whichflightwouldyouprefer?

  4. Revenue Management But… 1978 Airlinederegulationact New airlines, new competition, lower prices, and a better market for consumers Lowerlabortcosts, simpleroperations= Pricesmuchlowerthanthemajors

  5. Revenue Management Lowerprices = new and vastmarketsegment: PRICE-SENSITIVE TRAVELERS

  6. Revenue Management Lowcostairlines Largerairlines VS = Price-sensitivetravelersleft, bussinesstravelersstayed

  7. Revenue Management Thepeopleswitchedfromdrivingtoflying ‘s goal… Bringtheprice-sensitivetravelers back How? Compete byusingthesame fares?

  8. Revenue Management Wemust compete byusingour surplus seats! Wewill set lowerpricesontheseatsthat are usuallyempty Robert Crandall Chairman of AA

  9. Revenue Management Butthere´s a problem… Ensurethatbusinesscostumersdon’tswitch and buylowcostseats Howto do it?

  10. Revenue Management Wemust control thewaywesell tickets • Purchaserestrictions : • 30 days in advance of departure • Non refundable • Capacity-controlled fares: • AA limitedthenumber of discountseatssoldoneachflight

  11. Revenue Management • 1978. American SuperSaver Fares • AA wasableto match orundercutthelowest fares onthemarket Whatwastheeffect?

  12. People Express had a loss of over $160 millionby 1986, wentbankrupt and wassoldto Continental Airlines.

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