What is Revenue Management?

Revenue Management is the term used to describe the process of achieving maximum revenue from a fixed or ‘perishable’ asset, such as a seat on a plane, hotel accommodation, or a seat at a show or cinema.

The principles involved have many similarities with running a market stall selling fresh fruit, where the objective is to maximise the revenue from the sale of an asset which is perishable, and which may be worth little, or nothing, if not sold before a given date.

Revenue Management involves a range of processes and techniques, beginning with forecasting the demand, buying and/or managing the appropriate stock or inventory, providing the right product, or bundle of products, at the right price, in the right place with the right promotion.

By definition, as a discipline, Revenue Management must operate extremely closely with Marketing, Sales and Operations. The techniques involved are a combination of market segmentation, inventory control, data analysis and advanced forecasting, pricing, sales, cost control, performance monitoring and other disciplines.

These sophisticated techniques were developed initially in the Airline Industry in the 80s, then in accommodation and car rental. More recently they are being introduced to other sectors including tour operating and freight.

Whilst the Revenue Management Society is primarily focused on the Travel, Transportation and Leisure industries, the techniques used can, and do apply to industries with similar characteristics. Examples include telecommunications and advertising.