The Saudi’s airline industry has successfully adopted yield management (YM). This was especially after the industry was deregulated in the late 1970’s. In this case, yield management is applicable to the hotel industry as a strategy to maximize profits. Thus, it involves the allocation of resources, among various customers in hotel rooms relative to the existing market characteristics. In so doing, YM’s core concept is the provision of the right service to customers at right prices. In undertaking this study, the aim was the examination of practices, as well as perceptions concerning YM as per the understanding and awareness of hotel managers. In the study, several Saudi hotels of various sizes that use yield management were investigated. Identification of revenue management strategies, as well as general practices within the hotel industry was the key purpose of the investigation undertaken.
This investigation took place in seven key areas of the hotel industry namely human resource management, occupancy, third party websites, location, customer satisfaction, price-adjustment strategies and pricing strategy. The study involved three steps in achieving its purpose. The first step was exploring the perceptions of YM with the understanding of hotel managers. The second step entailed investigating YM practices in comparison to the seven key areas that influence revenue. Moreover, emphasis was on determining whether there was an actual attempt to manage revenue within the hotel industry. The results from the investigation were presented using a descriptive approach. The final step involved the establishment of the use of YM as a tool for managing revenue in hotel operations. This also showed how revenue management through YM should be done. Results here were presented using a normative approach.
In the methodology, qualitative research was applied. Through this approach, 20 revenue managers, as well as 20 general managers, from various Saudi hotels, were interviewed. The regions where these interviews were carried out were Mecca, Riyadh and the Eastern Area. Furthermore, documents and direct observations were used in collecting vital data. Direct observation essentially was used in comparing room rates through the use of direct and indirect distribution channels. Here, direct distribution channels involved making direct calls to hotels, as well as use of official hotel websites. On the other hand, the indirect distribution channels were the use of Booking.com and Agoda.com.
Thereafter, these different options were compared to see the one which was more efficient in revenue management. From the comparison, overall results showed that the practices and perceptions of YM are reasonable in these cities’ hotels. Of particular interest was the fact that respondents are aware of some key principles of YM. Consequently, many of these principles had been adhered to in room revenue management. For instance, stakeholders do understand the significance of segmenting potential, as well as current customers into various groups. This is critical as these various groups have different priorities, income levels and goals. As a rule, attention is on criterion like the ability and willingness to pay.
The study recommended strategies that can be adopted by Saudi hotels in overcoming misconceptions and perceptions of yield management. For instance, the system must be interlinked with location, occupancy, pricing strategy, price-adjustment strategy, HR, customer relation and the internet. Interlinking the system with these key concepts is essential in maximizing profits in the hotel industry. In essence, the paper offers knowledge to further research on the applicability of the yield management concept within the hotel industry in Saudi Arabia.