MEAN3b: Find the very best ticket price you can for Rome Italy or Hong Kong for the week after school gets out. Compare the online reservations systems. Once you have found your best price, find an article on “yield management” in the airline industry and explain why a seat on the same airline might range from $150 to $2000 depending on when you bought your ticket. Explain this to a skeptic in one clear and cogent paragraph. Finally, using “yield management,” how would you change the way the typical movie theater prices movie tickets?
I have always wanted to travel to Italy so I was rather interested to search for the cheapest ticket, little did I know how many travel websites there truly were. You often hear of Expedia and Priceline but what about EuroFlights or Destination360? I had never heard of those before this assignment and was shocked at the differences in prices between the numerous travel websites I explored. I searched approximately travel websites and ended up finding the best deal (if you can call it a deal) at CheapAir.com with my ticket price (for 2 stops) being $1,293.00 on United Airlines and the most expensive ticket through Priceline.com with the ticket cost at $3,058.00 on Air France. These prices were flabergasting compared to when I first examined prices to Rome at the beginning of March because tickets were significantly less. I hadn’t created my MEAN assignment yet but I could have gotten a ticket to Rome for under $1,000. Just a few weeks later ticket prices have gone up almost $400.00. These differences in ticket prices are due to the desire of the airline to maximize its revenues or profits. This is referred to as revenue management, or more often yield management.
Yield Management works like this: an airline sells the right seat to the desired right customer, at the right time and for the right location. The key for each airline is to find a tradeoff between the selling of the ticket at discount price in order to completely fill up the place and selling the ticket at the full fare price and only filling up a portion of the plane. This process requires the airline to involve consumer behavior as well as gathering past data analysis. This process overall becomes extremely difficult to follow. Using yield management airlines are able to segment its market into different passenger categories. With this said, we must acknowledge that the airlines are seeking to find a balance between the business person who needs a ticket now verses the price-sensitive consumer who waits for the best deal. One customer is willing to pay a higher fare in exchange for the flexibility of the ticket (schedule change, cancellation option, etc.) whereas the other will give up some flexibility if they are able to get the cheaper ticket. Since airline seats are perishable items (once a flight takes off the unfilled seats will never be filled causing those seats to be lost revenue. These strategies allow airlines to fill seats that may in a different case be empty. Yield management also gives an airline the opportunity to operate a large variety of different fares which can enhance the attractiveness that an airline can have on its consumer.
Sources: Voneche, Frederic. "Yield Management in the Airline Industry" Pg. 1-6. Google Scholar
Oberwetter, Robert. "Building Blockbuster Business" June 2001.
I have always wanted to travel to Italy so I was rather interested to search for the cheapest ticket, little did I know how many travel websites there truly were. You often hear of Expedia and Priceline but what about EuroFlights or Destination360? I had never heard of those before this assignment and was shocked at the differences in prices between the numerous travel websites I explored. I searched approximately travel websites and ended up finding the best deal (if you can call it a deal) at CheapAir.com with my ticket price (for 2 stops) being $1,293.00 on United Airlines and the most expensive ticket through Priceline.com with the ticket cost at $3,058.00 on Air France. These prices were flabergasting compared to when I first examined prices to Rome at the beginning of March because tickets were significantly less. I hadn’t created my MEAN assignment yet but I could have gotten a ticket to Rome for under $1,000. Just a few weeks later ticket prices have gone up almost $400.00. These differences in ticket prices are due to the desire of the airline to maximize its revenues or profits. This is referred to as revenue management, or more often yield management.
Yield Management works like this: an airline sells the right seat to the desired right customer, at the right time and for the right location. The key for each airline is to find a tradeoff between the selling of the ticket at discount price in order to completely fill up the place and selling the ticket at the full fare price and only filling up a portion of the plane. This process requires the airline to involve consumer behavior as well as gathering past data analysis. This process overall becomes extremely difficult to follow. Using yield management airlines are able to segment its market into different passenger categories. With this said, we must acknowledge that the airlines are seeking to find a balance between the business person who needs a ticket now verses the price-sensitive consumer who waits for the best deal. One customer is willing to pay a higher fare in exchange for the flexibility of the ticket (schedule change, cancellation option, etc.) whereas the other will give up some flexibility if they are able to get the cheaper ticket. Since airline seats are perishable items (once a flight takes off the unfilled seats will never be filled causing those seats to be lost revenue. These strategies allow airlines to fill seats that may in a different case be empty. Yield management also gives an airline the opportunity to operate a large variety of different fares which can enhance the attractiveness that an airline can have on its consumer.
The movie theatre industry adopted revenue management (yield management) as a primary business practice. Revenue management has been successfully adapted into numerous business in recent years including the movie theatre industry with its perishable product, limited capacity and time-sensitive business. Movie theaters have reduced prices before 6 pm and have done so to stimulate the demand during the lower demand times. In all the years it has been a discount price before 6 pm I am almost positive I have never seen a movie earlier than that. I understand the movie theaters are trying to segment their market but they are also loosing revenue. With the price of movies consumers have often stopped going or choose tow ait until it comes out in Red Box. To maximize profits and continue consumer loyalty, the movie industry should cut prices on older movies still in theatres and continue with current prices of new features. By lowering prices of older movies the consumer is ultimately saving money making them feel like their needs are being met. This gives the consumer more incentive to see new features and pay full price. The movie industry could develop multiple ticket market segments complement the usual approach by normal consumers.
By creating multiple price segments, discount and full price, the movie theatre industry revenue is met as well as the consumer demand. Movie theatres can offer full price tickets until show time and once the show has started offer a discounted rate. If there are empty seats in the movie, the theatre should want to fill them with discounted tickets since no one will be able to buy the same ticket at full price once the movie is over. I would also offer discounts on group rates such as double date, group dates, movie weekend, etc. which allow the movie industry to utilize revenue management and target the individually priced consumer market.
The ways to change current movie prices are endless. One theatre offers “old” feature movie tickets for $2.50 when a theatre just blocks away offers their cheapest ticket for $10.00. After reading different articles on yield management I have come to respect how businesses utilize this business tool to maximize profits. Movie theatres want to sell a ticket to the right customer, at the rice price at the right time and this is no different for the airline industry. It is a competitive market and large amounts of profits are awarded to those who get the customers first, even if that means increasing we have to donate our leg to buy a movie ticket.
Now, go see a movie! :o)
Tiffany
Tiffany
Oberwetter, Robert. "Building Blockbuster Business" June 2001.
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