Revenue management within the Maltese hotel industry

Abstract

Revenue management was one of the methods developed as a way of gaining competitive advantage and increasing revenue. Most of the basic concepts underlying revenue management have been used for decades, in a variety of industries, which contain businesses dealing with perishable inventory. Grocers, bakers, theatre managers and hotel operators have long recognized a need to manage demand by varying prices, in order to maximise income. However, it was the deregulation of the United States airline industry in the late 1970s that spurred the development of revenue management from an obscure art to a highly sophisticated, scientific methodology. Deregulation caused airline competition to increase and thus airlines tried to operate their planes as efficiently as possible. In a similar highly competitive environment, revenue management began to be adopted by the hotel industry in the international market around the middle of the 1980s. At the time the industry was being confronted with excess capacity, severe short-term liquidity problems and increasing business failure rates. Major hotel chains such as Hyatt, Marriott and Radisson resolved these difficulties by adopting revenue management techniques. Opportunities for applying revenue management in small and medium sized hotels are also actively being developed following a report commissioned by the European Union and carried out by Arthur Andersen.