Marriott Group Pricing Optimizer

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Submitted By mmorookian
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Marriot – Group Pricing Optimizer

Revenue management has been a system long used by the airline industry to optimize revenue on airline routes. Marriott implemented their own revenue management One Yield system twenty years ago to optimize individual guest room rates and allocation. One Yield is used in 97 percent of Marriott’s 3,300 hotels in 70 different countries to handle over 75 million individual guest room transactions per year. Recently, Marriott decided to move from One Yield to Total Yield so its revenue management system would include all revenue generation instead of just individual guest rooms. To develop this system, Marriott created a proprietary Group Pricing Optimizer (GPO) to help hotel managers decide on what rates to give to individual, group and outside catering events.

Marriott International’s One Yield revenue management system has optimized profit by utilizing demand forecast, inventory allocation, and seamless interface to the reservation system. Prior to One Yield, Marriott relied on the manual approach through historical rates. The problem with this approach is that the complexity of daily updates and rapid changes in demand over a very long booking horizon creates static rates. These rates do not reflect individual customers’ willingness to pay, do not reflect the potential for displacement, or the trade-off between a booking that might have higher value.

One Yield successfully linked requested bookings with forecasted demand, real time inventory and allocates the inventory to maximize the individual rates. Total Yield is an evolution on One Yield by pitting individual, group, and outside catering demand against each other for guest rooms and meeting space. These approaches to revenue management are similar to what we have discussed in class regarding linear programming and decision trees.…...

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