Implementing Revenue Management for Travel Agencies

Grace Suk Ha Chan,Basak Denizci Guillet

doi:10.5539/jms.v5n4p17

Abstract

<p>The purpose of this descriptive study is to explore revenue management (RM), it may relevant for travel agencies in their business management. In view of the features that this sector shares with traditional revenue management (RM) users such as the airline and hotel industries, travel agencies have the potential to enhance revenue by applying various RM techniques. Both traditional and non-traditional users of RM have benefitted greatly from the use of RM strategies. In particular, revenue per available tour product (RevPATP) is invoked, both in the present modified typology of RM and in developing RM strategies for the travel sector. The study utilized data from in-depth interviews with industry professionals to determine their perceptions of RM and understand their comments about the possibility of RM implementation in travel agencies. The study’s results reveal that travel agencies have limited knowledge of RM, limiting themselves to profit maximization alone. Although the professionals interviewed were aware of the unpredictable nature of the environment in which they operated, most believed that only large travel agencies were capable of applying RM to their operations.</p>

Highlights

Today’s highly unpredictable and competitive business environment has profoundly influenced the travel industry
The purpose of this descriptive study is to explore revenue management (RM), it may relevant for travel agencies in their business management
The purpose of this study is not to outline how revenue management works but rather to examine the possibility that RM could be integrated into the business management practices of Hong Kong travel agencies

Summary

Introduction

Today’s highly unpredictable and competitive business environment has profoundly influenced the travel industry. Many travel agencies either are having financial difficulties or have gone out of business because of increases in operating costs such as labor and leases (Hermes Management Consulting, 2008). Struggling travel agencies must increase their margins while simultaneously satisfying their customers in an increasingly fragmented environment (Hermes Management Consulting, 2008). Most travel agencies still rely on selling airline tickets, hotel packages and group tours to generate revenue, despite their very low margins. To survive in this uncertain environment, travel agencies need to adopt advanced operational management methods, among which revenue management (RM) may be the most suitable. Many companies in the service industry, ranging from hotels and rental car agencies to restaurants, have adopted RM practices that involve information systems and pricing strategies to manage customer flow and allocate the right capacity for the right customer at the right place and time (Kimes, 2000)

Objectives

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Discussion

Conclusion