Revenue management (RM) was first implemented in the 1970s and mainly practiced within airline industry, also known as airline yield management (Cross, Higbie, & Cross., 2009). The early practice can be summarised by Smith (1992) as “selling the right seats to the right customers at the right price” (as cited in Schuessler, 2010). In the late 1980s, the hotel industry shortly adapted the practice from the airline industry with the similar objectives to increase revenue. When comparing against the airline industry, hotel RM aims to manage inventory through length of stay and variable room rates, by using historical data and booking pickup to forecast the demand (Schuessler, 2010).
Although effective inventory management like strategic room rates maximize the possible revenue generate from the particular transaction, it failed to mention on achieving optimal long-term profit as varying lifetime value of the customer was not being considered (Noone, Kimes, & Renaghan, 2003). Such unseemly approach of RM may negatively affect customers’ perception of the hotel, resulting loss of customer loyalty in the long run (Shoemaker & Bowen, 2003). Shoemaker (2003) further mentioned affected loyal customers less willing to share positive word-of-mouth on the property but more interested to search on the rates of surrounding competitors for future visit. Through above, it shows the importance for the approach to RM to include the lifetime value of a customer based on loyalty and retention, the concept is also known as customer-centric revenue management (CCRM) (Schuessler, 2010).
Beside strategic room rates, the hotel industry is shifting the scope of RM to be applied on all non-room revenue streams in the hotel (Noone, Enz, & Glassmire, 2017). Noone (2017) classify the concept as total hotel revenue management (THRM) comprises the consideration of different revenue streams, understanding of customer values which equates to CCRM and the switch from top-line to bottom line to include distribution and operating costs. Kimes (2017) conducted a poll with the results indicating 63% of respondents believed RM will be applied on all revenue streams in the next five years. With most respondents indicated function space and restaurants being the main areas of RM application, the progress in implementing on property level have been uneven (Kimes, 2017).
The purpose of this paper is to initiate a discussion on the application and feasibility of THRM on the selected hotel property.