In some operations there’s no such thing as A price

I was reading this piece from the Wall Street Journal which identifies that despite being in the process of merging, American Airlines and US Airways are offering very different prices for the same seat on the same flight.  Their reservations systems are so complex that it will take them years to integrate the two.  In the meantime, their savvy customers are checking both websites to find which operator has the best fare.  In many cases the difference can be quite large. This is just one example of how complex revenue management is in the airline business.

But it reminds me of a couple of first hand examples of this from the hotel business.  Back in the mid-1980s, long before I.T.-supported revenue management systems existed, I was running a course for hotel managers when the topic of room tariffs came up.  One of the delegates was the GM of a newly opened business and conference hotel, and he freely admitted he did not know how many different prices could be charge for his rooms – all of which were the same standard room.  So he went away that evening to find out.  The next day he returned with a print out of all his different room rates.  To show us he stood on a chair, and let the paper roll drop to the floor.  Over 300 prices for the same identical room – 30 years ago.

A few years later I spent a day in the Reservations Office of a large five star London Hotel, observing how revenue management worked in practice.  Again systems were relatively primitive, so room rates were written on a white board for reservationists to quote in response to telephone enquiries.  At 08.45 there was price A for rooms to be sold that night, the highest price ever quoted as the hotel only had two rooms unsold.  Then there was the unexpected departure of a party of guests, who vacated 10 rooms.  Immediately the new price was A-£60.  It stayed like this for about 30 minutes until some rooms were sold.  It then became A-£30, until by 11.00 it was back to price A.  The guests who phoned in at 09.00 were lucky, they got a good deal.

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This entry was posted in Chap 07 Capacity and demand, Sector: Hospitality & Tourism and tagged , , . Bookmark the permalink.

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