Optimization Applications in the Airline Industry


In the 1970’s, Yield Management (also called “Revenue Management”) progressively began to be adopted in the airline industry. Soon, other sectors with finite stock realized they could use these advanced statistical technics in order to optimize profit and it became an indispensable strategic tool. Hotels quickly followed and Revenue Management became essential to their survival. With the first applications of Revenue Management emerged the first conflicts. Due to lack of understanding, people began to perceive this practice as unfair (even more in the Hotel industry as its implementation was more recent than in aviation). Through the years, this issue became clearer and it appeared that perceived fairness of this field was mostly influenced by the way hotels manage it and, and therefore, the capacity employees have to understand Revenue Management and communicate around it efficiently to their clients.

Most of the researches pointed out most the problems in Yield Management’s integration came from the lack of alignment between Price Managers and Key Account Managers, the objective of the first ones being Short-Term profit while the second ones prefer maintaining Long-Term relationships with their main clients. In order to attenuate this issue, Yield Management needs to integrate the customer component. This is what researches on the subject called Customer Centric Yield Management. Organizational Culture being the element which defines the interactions between functions, we decided to focus on its impact on Yield Management Integration.

The purpose of this paper is to assess how Organizational Culture Impacts Customer Centric Yield Management integration and to identify which culture (based on its characteristics) could be ideal to do so. Firstly, we will define the concepts of Customer Centric Yield Management and Organizational Culture. We will then see how Organizational Culture Impacts Customer Centric Yield Management. After confirming that Culture is essential to integrate Yield Management and the Customer Relationship dimension, our goal will be to identify the Critical Success Factors for its implementation and identify which type of Organizational Culture regroups a sufficient amount of these characteristics to efficiently help in its integration.

KEY WORDS: Yield Management, Customer-Centric, Integration, Organizational Culture, Customer Relationship Management.   I/ Introduction In order to answer our research question, we first had to define several elements. Effectively, despite the fact it is used in more and more sectors and being placed at the center of company’s financial strategy, Yield management and its problematics remain obscure for a vast majority of people. What is Yield Management? A bit of History… Yield management takes its origins in the airline deregulation of the airline sector in 1979. In the 60’s, American Airlines developed the first online reservation system named “Sabre” (Semi-Automated Business Research Environment). The goal of this reservation system was to centralize and control reservation activity. In 1978, American airlines were deregulated in 1978 (Airline Deregulation Act) which caused a lot of losses for airline companies. Robert Crandall, CEO of American Airlines at the time realized that “Sabre” was detaining essential historical data over ten years of booking and this is when he decided to create a system that would vary the proportion of discount and full-fare seats on a day by day basis. This is how what would be called later “yield management” by Robert Crandall was born. In 1988, American Airlines then implemented what they called “Dinamo” (Dynamic inventory). It really quickly improved the company’s profit and became essential in the aviation industry. A few Definitions… Literally, Yield management can be defined as the management of profit.

It is the process of managing the right type of capacity (finite stock is required in order to use yield management as a tool) to the right type of customer (importance of identifying solid segments) at the right price and at the right time in order to be able to maximize profit (Yield). So we could identify the main issues of this field, it was essential to understand the basics of yield management. As described above, Yield Management consists in selling the right product, to the right person, at the optimized price and moment in time. Supply and Demand management: Reaching the Equilibrium point Even if today, Yield Management requires complex statistical calculation, only basic economic theories about Supply and Demand are required to understand it. “When the price of a product falls, the corresponding reaction is a rise in the quantity of the product or service demanded.

Alternatively, when price increases, the corresponding reaction is a decrease in the quantity of the product or service demanded”. 1 Basically, the goal is to reach the equilibrium point. It’s application in the Hotel Industry… After understanding these simple concepts, we had to see how Yield Management could be applied in the hotel industry. As explained earlier, in order for Revenue Management to be applied in a specific field, it is necessary to have a finite horizon to which the firm can sell its product. Concerning the hotel industry, the finite stock would be the rooms: “In the case of hotels, yield management is concerned with the number of rooms that should be sold at various rate levels.

Obviously, a tradeoff exists. The manager would prefer to sell all rooms at the highest rate possible, but since this rarely is feasible, following this policy may lead to empty rooms and lost revenue.” 2 or “selling the right room to the right customer at the right time for the right price and for the right length of stay” (Cross, 1997) 3 Perceived Fairness… When reviewing past literature on yield management, it appeared clearly that the quantitative aspect had already been studied a lot. New problematics emerged during our researches, in particular the acceptance of Yield Management by people which is defined in several articles as “perceived fairness” of Yield Management. This concept is essential to define in order to have a full understanding of Yield Management issues. Sheryl E. Kimes, one of the main researchers in this field addresses this concept by making a clear distinction, analyzing on one hand the case of aviation: “The airlines have been using yield management longer than other industries, and customers seem to be used to the fact that they are charged different fares for the same flight and that they will receive specific benefits if they accept certain restrictions. In a sense, even though they are buying a similar seat, they are buying different products, because of the associated restrictions” and on the other hand the case of other industries where Yield Management is more recent: “In other industries, such as the hotel and cruise-line industry, obvious restrictions may not be in place, although customers may pay different prices depending on when they place their reservations. A customer who pays more for a similar service and cannot perceive a difference in the service may view the situation as unfair”.

The first concept we therefore tried to understand is Perceived Fairness. Jona Lacka’s paper 3 consolidated most of the researches done on perceived fairness and considers it as to be analyzed and solved by dividing it into the three following pillars: Many papers have been written on this subject, taking the consumers point of view in order to understand which factors could help improve yield management acceptance in several sectors. However, very few decided to analyze this Yield Management implementation issue from the company’s vision. An organizational point of view… In their paper, Xuan LornaWanga and Ross Brennan 5 decided to focus on a more organizational aspect of Yield Management success, intending to assess what could be the problems in integrating yield management in hotels, in particular when put into context with other functions (they particularly focused on integration between Key Account Management and Yield Management). The conflicts between Revenue Managers and Key Account Managers appear in past literature as one of the biggest obstacle to Revenue Management’s integration. They were able to identify the following impacts between Revenue Management and Key Account Management: “It is understandable that the revenue managers were skeptical about an account\’s potential returns, and hence often objected to the foregoing revenue maximization opportunities for uncertain future returns from relationship development. The revenue managers regarded ‘account potential’ and ‘lifetime value’ as ‘rather vague’ or an ‘empty promise’, offering no guarantee of future revenue. Therefore, they would rather hold on to the current opportunities to avoid future disappointments.

It is clear that RevM needs to be distinguished from profit-yield management to better reflect the true meaning of each term.” 5 There is therefore an identified discrepancy between the targets/ objectives of Price managers and Key Account Managers. The Short-Term vision of the Revenue Manager opposed to the Long-Term vision of the Key Account Manager appears as being an important element in Yield Management integration. At this point of the research, it clearly appeared to us that in order to efficiently integrate Revenue Management, it would be essential for a company to make Yield Management work with other functions in order to accomplish an efficient integration. It is at this point we realized organizational culture would have a strong impact on Revenue Management integration. Integrated Yield Management = Customer Centric? Following this conclusion, we came to ask ourselves the question: “How could we align the interests of Price managers and Key Account Managers”? and “Does this concept already exist in past literature”? We discovered through several articles that saying a Yield Management department is integrated in a company meant that it is working well in relation with other functions (such as marketing and communication) and that therefore, an integrated Yield Management has to be “Customer Centric”. It means that in order for Revenue Management to work efficiently, it as to take into account the customer relation dimension (long-term customers etc…) Rust et al. (2004) 6 and Vogt (2011) 7 defined the term customer-centric yield management has attaining profitable relationships with the firm’s most lucrative customers to maximize lifetime values of current and potential customers.\

Based on these papers, we chose to understand how to reach an efficient customer centric Revenue Management. As presented below, they based their theory of Yield Management success on the following dimensions:  At this point we identified that Yield Management, for historical reasons, may be less well integrated in the hotel industry then in aviation. Readings show that the main obstacles to yield management integration are human and that in most cases, Yield Management is not integrated due to Organizational structure and culture. We decided to focus on the impact of organizational culture as it had almost never been studied in the context of integrating Revenue Management with Key Account Management. We already defined the concept of Customer Centric Yield Management. We know that integrating Yield Management means aligning interests of the different function (in particular Key Account Managers). We also know that Organizational Culture may be one of the essential dimensions necessary to understand. However, in order to answer to our research question, we also needed to define organizational culture and select a theory that would suit our analysis in order to identify the link between organizational culture and performance.

What is Organizational Culture? In his book, Edgar H. Schein defines it as follow: \”A pattern of shared basic assumptions that the group learned as it solved its problems that has worked well enough to be considered valid and is passed on to new members as the correct way to perceive, think, and feel in relation to those problems.\” 8 Bruce M. Tharp gives a simple definition of it: “Group’s shared values, attitudes, beliefs, behaviors” 9 Our objective is therefore to establish how values, attitudes, beliefs and behaviors inherent to a hotel can impact the integration of Revenue Management Practices. First, we had to identify the different types of organizational cultures. In 1974, John Campbell identified 39 indicators to help define several groups of organizational cultures. Robert Quinn and John Rohrbaugh 10 consolidated these 39 indicators into two major dimensions which are: Flexibility vs Stability and Internal vs External Focus: Thanks to these two dimensions, they achieved to identify 4 main organizational culture groups. The first one they identified is the “Clan” culture. The main characteristics identified for this type of culture are the friendly relations maintained between people in these organizations. They can be seen as an extended family. In this kind of culture, leaders have an essential role and the company’s traditions are essential. They put the accent on the long term benefits of human resources development as the concern for people is strong. The second type of organizational culture identified is “Adhocracy”, also called “Create”. This type of cultures put the emphasis on creativity as well as agility and encourage people to take initiatives. Each worker is involved in the different processes. Adhocracy cultures have a strong orientation towards change and are therefore more adaptable than other cultures. “Hierarchy” cultures can be defined by formality. Rules and procedures are the most important things which impacts this organization has they may have more trouble than others to accept and manage change. This kind of cultures mainly focuses on Performance. Finally, market cultures are mostly results-driven.

Competitive pricing and market leadership are important. In order to have a clear vision of what indicator is linked to which organizational culture group, we decided to place the main indicators on Robert Quinn and John Rohrbaugh’s Matrix: 10 However, “Other research being conducted around the same time as the Competing Values Framework — Martin and Siehl (1983) 11, Louis (1983) 12, Gregory (1983) 13 —emphasizes that the company culture is not homogeneous”. 9 Past literature therefore shows us that there is not only one answer to our research question. Saying that a company’s culture is not homogeneous means that most of the time, we cannot expect a hotel to fit with one group (Clan/ Adhocracy/ Hierarchy/ Market) in particular has its culture may be a mix between the characteristics of Clan and Adhocracy for example. Despite the limit of this theory, we can still expect to identify a main tendency for each hotel and therefore determine which culture characteristics fit with Customer-centric Yield Management integration.

II/ Organizational Culture and Customer Centric Yield Management A/ Organizational Culture impact on Yield Management: Now that we analyzed and defined what really is organizational culture as well as Customer-Centric Yield Management, we are going to see through past literature how organizational culture and Customer Centric Yield management (has seen before, customer centric yield management is a Yield management (short term goals) combined with a stronger customer relationship dimensions) are linked and how their integration depends on cultural factors, sometimes even more than forecasting tools. Our goal during this first part will be to confirm the role of Organizational Culture on the successful implementation of a Yield Management Department. Primarily, we are going to establish what is the link between yield management and organizational culture. The first thing we realized about revenue management integration, when we began our literature review was that developing and implementing a revenue management service is a very “complex and challenging task” (Fevzi Okumus, 2004).14 One main question then emerged: what aspects make this integration complicated, and, when identified, which actions can be put into place in order to overcome these difficulties? Through our assessment of the literature review, we saw that one axis of study had been left out and required a deeper understanding, one with higher managerial implications, the role of organizational culture on yield management. In his study on “Implementation of Yield Management practices in service organizations”, Fevzi Okumus (2004) stated that the major blocking points in successfully implementing yield management in service organizations was coming directly from the companies (in our case, hotels) organizational structure and culture.15 Jone and Hamilton (1992) stated that “a successful yield management system depends on the people has much as on sophisticated technology”.16 Peng and Littel John also said that: “organizational culture is essential in implementing yield practices in hotels”. Previous researchs also show us that usual organizational cultures are not efficient in order to implement advanced yield practices (Donaghy, McMahon-Beattie and Mc Dowell. 1997) and that it is therefore an interesting field to study.

He also realized that one of the aspects previous studies were completely forgetting was the strategic implications of implementing yield management in service organizations. Thanks to past literature, we succeeded in establishing that there was a really strong link between organizational culture and an efficient yield management implementation in service industries. It is important to understand that most of those researches were focusing on the link between Revenue Management and Organizational Culture, however, we can assume that Culture will always be important in the integration of a company’s new function and that therefore, Customer Relationship’s success may depend may also strongly depend on it (we will verify our hypothesis in part B). B/ Organizational Culture and Customer Relationship Management: First thing that can clearly be identified is that there is, like for revenue management, very little research was done in this area (Fahed Alduwailah and Maged Ali, 2013).

A lot of companies (and it is clearly predominant in service industry) are investing a lot in the service industry. Among these companies, the proportion which fails to implement a CRM program is considered to be between 35% and 75% (Rigby et al. 2002, Zablah et al. 2004).

Therefore, it can be considered that the success rate of customer relationship programs implementation does not justify its costs (Lindgreen et al. 2006).19 In their research on the effects of organizational culture on customer relationship management success, Fahed and Maged (2013) explain how most of the CRM initiatives “not only fail to deliver the desired economic benefits, but can also damage the organization relationships with its customer”. But why do these companies fail to achieve a successful integration of customer relationship management? Because they do not take into account the cultures, attitudes and values of the organizations when wanting to develop a viable relationship management strategy (Rigby et al. 2002).  Adopting a successful CRM process also necessitates “a strategic and cultural change from a product or process focused culture towards a customer focused culture” (Christopher et al. 1991, Peck. 1995 and Ryals and Know, 2001).21 22 23 We can make the assumption that organizational culture has a strong impact on the integration of yield management and customer relationship management. Therefore, we can expect that an organizational culture has characteristics which will be favorable or unfavorable to the integration of Yield Management and Customer Relationship Management Our first part of this literature review clearly shows us that Yield Management and Customer Relationship management are strongly impacted by the organizational culture type. We can assess with confidence that Customer Centric Yield Management will be equally impacted as it is simply a combination of the two. In the second part of this literature review, we will see which are the Key Success Factors of Customer-Centric Revenue Management.

III/ Customer Centric Yield Management: Key Success Factors During the first part of the literature review, we were able to identify the strong link that is existing between a hotel’s organizational culture type and the integration of a Customer-Centric Yield Management department. We will use the critical success factor method in order to identify the cultural elements which are essential to Customer-Centric Yield Management so we can understand which type of culture may be favorable to its integration. “Critical success factor method” Critical success factors (CSFs) are defined as “the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance” (Griffin, 1996) 24 Sparrowe\’s (1994) study with data from 182 employees in 33 hospitality organizations was able to build a structural model that puts in relation management commitment and employee retention. Sparrowe identified six factors in his model: He then hypothesized 11 possible links between these factors. 25 A/ Key Success Factors of Yield Management integration In order to be able to define which culture is the most appropriate in order to integrate Yield Management, we first had to identify the Key Success Factors of its integration. In 1995, Griffin identified 27 critical success factors in order to implement Yield Management. We will only focus on those that can be linked to organizational culture. 24 As we saw in the previous part, a true cultural change is needed in order to implement new practices. Donaghy et al. (1997) 45 used Lewin’s (1951) 46 three stage model of change in order to identify how an insufficient change management can impact negatively Yield Management integration. According to this model, in order to implement change, it is necessary to go through the three steps above: – Unfreezing: need for change – Changing: transition – Refreezing: evaluation They identified the Refreezing phase as being responsible of most of the problems in implementing a change in a company. We can therefore assess that without proper evaluation, customer-centric yield management will have trouble to be implemented in the company. Dawson (1997) 47 and Wilson (1992) 48 however identified this model as being obsolete for complex change. Lewin’s Model: Change was identified in past literature as one of the main criteria’s for Customer-Centric Revenue Management integration. Effectively, several authors put the accent on the orientation towards change : “Organizations need some form of cultural and structural changes in order to become more receptive to change and also to facilitate the active support, coordination and communication of all levels of management” (Christine Nolsø Hansen, Klaes Eringa. 1998). 26 H1: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Adhocracy is favorable to change orientation and adaptability.

Therefore, it may be a suitable culture to integrate yield management. We can also make the assumption that the change dimension would be essential for the integration of any function. Donaghy et al. (1997) 17 identified that “commitment and participation from all management levels when deploying yield management” was another important Critical Success Factor. Kimes (1989) 27 goes even further on this idea by saying that in absence of commitment of top management, these systems are doomed to failure since they won’t understand the implications in these practices. H2: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Clan cultures are favorable to top-management commitment and it may be a culture favorable to yield management integration Another criterion which was identified in order to implement efficiently yield management practices is training, and more generally “employee implication” because all the stakeholders need to have a good understanding of the yield management practices in order for it to be efficient (Luciani.1999) 15. This idea is supported by Donaghy et al. (1995) 35: “Staff are required to have an exhaustive and precise understanding of yield management if they are to be successful”. We can assess that employee implication is strongly linked to top-management commitment. Even if there is an important commitment from top management and a strong training program, in order to involve employees as much as possible in these programs, it is essential to put in place a solid feedback process for them to be motivated: “Employees must be able to learn from their decisions, information and feedback mechanisms are critical. As a yield management program becomes more sophisticated, so too will the feedback mechanisms” (Lieberman, 1993). 28 H3: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Clan cultures have a stronger feedback process which is positive for yield management integration. A second criteria identified by Luciani has a critical success factor is communication. 29 Other researches go towards the same direction when recommending a team approach (Donaghy, McMahon, Beattie and Mc Dowell. 1997).

Kasavana and Brooks (1995) 30 add value to this idea by pointing the fact that interdepartmental cooperation is essential to the yield management implementation success: “While banquet and catering functions are considered food and beverage revenue generators, they can have an effect on yield decisions, local food and beverage function should be viewed in light of the potential for booking groups that need meeting space, food and beverage service and guestrooms. Cooperation and communication between hotel departments is essential to yield management”. “Ideally, all areas of the hotel will be involved with the yield management program. Only when this occurs will the program be truly successful (Kimes, 1992). 

C. N. Hansen and K. Eringa 26 put the accent on the idea that Yield Management needs to be integrated with other functions and proposes the following approach: It therefore appears essential to promote interdepartmental cooperation and communication in order to align the goals of each function of the company. H4: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Clan cultures favor communication and collaboration and therefore the integration of revenue management. H5: Clan culture is favorable to interdepartmental cooperation because of the fact that most of the time, it’s structure is “matrix”. Kimes (1989) 27 also puts the accent on the fact workers should be allowed some latitude in terms of decision making and that if they don’t do it, employees may “grow to resent the system”. H6: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Adhocracy cultures are more favorable to agility and will therefore create a work context were employees have more liberty of decision, more latitude. Key Success Factors in yield management implementation: From this first part of the literature review, we can make the assumption that Clan culture will be the best to integrate yield management in hotel. However, has Adhocracy promotes change and agility, we can imagine that a mix between both will be the ideal culture to integrate revenue management. On the contrary, we can expect Hierarchy cultures to encounter problems in integrating it as its main characteristics are in opposition with the Critical Success Factors for Revenue Management integration (rigid structure, not enough communication and cooperation). Thanks to previous literature, we were able to make the hypothesis that Clan culture may be ideal in order to be able to integrate yield management in a hotel in a successful way. However, Adhocracy culture distinguishes itself by have one of the most important characteristics. In the second part, we will use past literature in order to make hypothesis on which culture (or culture mix) will be the best to integrate the customer relationship management dimension of yield management. B/ Key Success Factors of Customer Relationship management integration We saw during the first part of the literature review that organizational culture clearly had an influence on the implementation of customer relationship management. We will follow the same process we used with yield management and try to identify several critical success factors that will helps us to understand which culture may be more favorable to integrate customer relationship management.   It already appeared as a key success factor for integrating revenue management, it is without surprise that one of the main integrating factor we discovered when reviewing past literature is the orientation towards change (Chen Q and Chen HM (2004) 32; King and Burgers (2008) 33, Garrido-Moreno and Padilla-Melendez (2001) 34. H7: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Adhocracy is favorable to change orientation and adaptability. Therefore, it may be a suitable culture to integrate yield management. A second criteria which appeared to be important is the customer orientation culture of the hotel even if it may seem evident that any service company should engage in strong customer relationships (Rigby et al (2002) 20; Rahimi and Burman (2009) 35 and Garrido-Moreno and Padilla-Melendez (2011)). 34 H8: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Clan is favorable to a better customer orientation culture. Therefore, it may be a suitable culture to integrate customer relationship management. Has for the integration of revenue management, top-management support and commitment appear has being essential for the integration of customer relationship management (Kim et al. (2002) 36, Rahimi and Burman (2009) 35, King and Burgess (2008) 33 as well as Chen Q and Chen H-M (2004)) 32. H9: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Clan cultures are favorable to top-management commitment and it may be a culture favorable to customer relationship management integration. Last but not least, staff commitment also appeared essential in the integration of customer relationship management (Mendoza et al. (2007)). 37 H10: Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Clan cultures are favorable to staff commitment and it may be a culture favorable to customer relationship management integration. Researches from Bentum and Stone (2005) 38 and Iriana and Buttle (2006) 39 demonstrate the fact the degree of risk taking and innovation should be associated with successful customer relationship management system implementation.

Following Kim Cameron and Robert Quinn organizational culture theory, we can make the assumption that Adhocracy cultures are favorable to risk taking as well as more innovation (companies which are more “Agile”) and it may be a culture favorable to customer relationship management integration. Sun et al. (2006) 40 put the accent on the fact that “adaptive learning” is essential in order to integrate customer relationship management in a hotel. We can directly link this idea to H11 since more agile companies will in general, encourage adaptive learning. On their side, Wilson et al. (2002) 41 put the accent on the importance of having integrated functions. H12: Clan culture is favorable to matrix organizations and therefore to having integrated functions and departmental cooperation. Shao et al. (2012) 42 put the accent on all these critical success factors: “In order to enhance effectiveness of ERP systems, top management needs to enact initiatives that overcome cultural barriers and brings about changes in the underlying organizational culture to increase their member’s knowledge-sharing behaviors, so as to support the integrated, cross functional nature of ERP systems”. In conclusion, we were able to identify several essential elements in past literature. Firstly, we understood that Yield Management was more recent in the hotel sector than in aviation and is therefore less easy to integrate. We understood that despite the fact is it strongly linked to statistics, human factor may be really important in its integration. Our lectures showed us that an integrated Revenue Management needs to be Customer – Centric and that the company’s culture possesses characteristics that may or may not help in its successful implementation. After focusing on understanding the concept of culture, we identified criteria’s that were identified in past literature as Key Success Factors (the method used is described in the methodology part) for Yield Management integration. We will try to confirm our hypothesis during the analysis part. IV/ Methodology A/Research Methodology So we could bring further information and ideas on the Customer centric yield management subject, we chose to analyze it with a quantitative method in order to overcome the several problems encountered by previous research’s using a more qualitative analysis. Effectively, in most of the previous scientific papers, the choice was made to analyze Yield Management integration through qualitative group interviews. However, in most of the cases, the following limit of the qualitative methodology appeared as problematic: most of people are influenced by the fact their colleagues are seating next to them during the interview and in the majority of situations, they decide not to speak the through. For example, if a researcher asked in group interview to a Key Account Manager if he thought that Yield Management techniques are impacting negatively is long term relationship with a good client, the Key Account Manager would in most of the cases not admit honestly in front of the Yield Manager that he doesn’t approve is techniques. As we make the assumption that precise organizational structure criterias are impacting Customer Centric Yield Management integration, it didn’t appear essential to use qualitative technics. When we began sending our questionnaires at the end of July, we realized it would be difficult to reach as much hotels as possible and that in order to get enough answers of our questionnaire, we would have to target hotel channels to be more efficient. Thanks several contacts, we achieved to reach three hotel channels in the Parisian region (but which exists worldwide) as well as two smaller hotel channels in France. This choice was orientated by the fact our research question is about identifying how to integrate pricing decisions with commercial decisions. Furthermore, the problematic opposing short term vision (Yield Managers) versus long term vision (Key Account Managers) can clearly be identified as existing strongly in bigger structures as well as in hotels which are of a higher standard (three stars and above). In order to get a sufficient number of answers in our questionnaires, we decided to use Google forms to communicate our two questionnaires faster. We chose to communicate our questionnaires to the Key Account Managers of the hotels. Despite the fact we were able to obtain a satisfying number of answers with our questionnaire, several limits appeared in its reliability. Potential limits? The first problem we identified with our research methodology is concerning the choice of the hotels.

Effectively, as explained above, we had some difficulties to find an important number of answers to our questionnaire due to the fact it is not easy to approach hotels. We were forced to target “channels”. The first limit is therefore the important lack of diversity in our respondants. If we had more variations in the type, the size or the structure of the hotels, we would be able to assess the impact of structure as well as culture. We decided to adapt our questionnaire analysis to the type of respondant we had and therefore to create one group for each hotel that we would analyze separately from the others. The goal being to identify for each channel the type of organizational culture that predomines and then to understand if Yield Management is (or not) integrated in this hotel channel. B/ Identifying the hotel’s culture As described earlier in this paper, the first element that we needed to assess in each hotel is the organizational culture. We explained earlier that the theory of assessment of Organizational Culture we chose was based on Kim Cameron and Robert Quinn’s theory. They developed a world famous method which is called the “Organizational Culture Assessment Instrument” or OCAI. This questionnaire (OCAI) is based on the theoretical framework of “Four Competing Values” that they matched with four identified groups of organizational culture. The OCAI basically considers that any organization has an identified mix of these four types of organizational culture and their questionnaire allows to put into light which particular (or mix) culture is dominant in the organization. The OCAI is currently used by 10,000 companies worldwide. The questionnaire works as follow: The organization participating has to answer questions by dividing for each of them 100 points over the four alternatives which corresponds to the four culture types. The method allows to identify which one of the culture types dominates the actual organizational or team culture. Usually, the test is taken a second time by dividing the 100 points over similar alternatives depending on what the respondent would like to see in the company or basically. It allows to measure the desire for change in the company. Even if it could have been really interesting to assess the desire for change of the hotels (as Hypothesis 8 states, attitude towards change is a really important dimension impacting directly the organization and therefore the integration of Yield Management) we chose not to apply the second round of OCAI questionnaires because our main objective was to assess the actual Organizational Culture of the company and not the way people in the company would like the future Culture to be (or the general improvements they are seeking). 

During this questionnaire, the participant hotels were asked to assess the following six dimensions: 1. Dominant Characteristics 2. Organizational Leadership 3. Management of Employees 4. Organizational Glue 5. Strategic emphases 6. Criteria of success Cameron and Quinn came up with four quadrants, corresponding to the four organizational cultures that differ strongly: ð Internal focus and integration versus External focus and differentiation ð Stability and control versus Flexibility and discretion When the first step, assessing the culture of the organization was done, the second step was to identify if Yield Management was well integrated in this hotel and therefore if our assumptions were verified or not. C/ Identifying the level of integration of Yield Management in Hotels We therefore had to find a technique which would allow us to assess the successful (or not) integration of Yield Management. In the paper Revenue Management Integration (Malte Rücker, 2010), the author proposes a theoretical approach for Revenue Management Integration (RMI) assessment.

Ng et al (2007) 53 sees integrated Revenue Management process as depending on four decision sets: However, this framework appears as abstract and was improved by following research’s. Effectively, in 2007, Pinchuk 54 identified that revenue management, pricing, customer relationship management as well as distribution channel management should not be separated in the analysis, he decided to give a more “functional” vision. As pointed out by Cross, Higbie and Cross (2009) 55, this new approach gives a more strategic dimensions to Revenue Management Integration. In 2009, Pinchuk realized the importance of goal alignment as well as common skill sets to be really important for Yield Management Integration. He represented is ideal departmental and functional integration of all relevant departments and functions as follow: It is based on this Revenue Management Integration questionnaire that we tried to assess how well their hotel had integrated the Yield Management Function. V/ Research Findings: We achieved to have 81 answers to both our questionnaires (we had to remove some of the hotels who didn’t implement Yield Management Practices. Overs these 81 hotels, 33 were large scale one’s (40.7%), 40 were Middle scale hotels (49.4%) and 8 were small hotels (9.9%). All these hotels are Resort and “Chain” Hotels. Channel 1 proposes a Budget service while Channels 2 and 3 propose a mid-range service and Channel 4 a more sophisticated World Class Service. Concerning the results on our first questionnaire, the proportion of the different Organizational culture groups is as follow: We decided to group Channel 2 and 3 as these Chains have a similar structure (size etc…). It appears Chain one has mainly hotels with a Hierarchy Culture (50%). Based on our assumptions, Yield Management may not be well integrated as Clan and Adhocracy should be the ideal cultures. Chains 2 and 3 (middle size structures are mainly Adhocracy and Clan. A hotel combining these two types of culture may have an advantage to integrate Yield Management. Chain four is, as chain one, in majority a Hierarchy Organizational Culture. As for Chain one, we can expect Yield Management not to be perfectly integrated. Based on our assumptions, we can expect chain 2+3 to be the ones with the highest rate of Yield Management integration. The second step is to determine how the type of culture identified can be linked with our second questionnaire focusing on Revenue Management Integration. The first analysis we decided to do was to look at the % of integration for each group of organizational culture. The first element which can be quickly identified is that hotels were the dominant cultures is Adhocracy Adhocracy (51.9%) and Clan (42.3%) seem to have a better tendency to integrate Yield Management. On the other hand, Hierarchy appears to be the Organizational Culture with the worst rate of non-integration è 38.1% This results confirm our first hypothesis as they show that orientation towards people as well as the orientation towards change amplified in Adhocracy cultures is favorable to Customer Centric Yield Management Integration. In order to go further into the analysis, we decided to link each question of the RMI to the hypothesis presented earlier in order to assess the impact of each Key Indicator on the integration of Yield Management. Focus on Questionnaire 2 (RMI): We decided verify if our hypothesis is linked to the expected group of cultures. We already confirmed that Adhocracy and Clan cultures are the ones most favorable to the integration of customer-centric Yield Management, we now want to assess if these results are linked to the expected Key Indicators. H1 is confirmed as Adhocracy seems to be favorable to adaptability and change (as presented in the literature review). Unsurprisingly, Hierarchy cultures appear to score negatively on this aspect (in these kind of cultures, hotels can be expected to have a more rigid structure and therefore, making important changes may take more time).

Therefore, even hotels of Hierarchy cultures were Customer-Centric Yield management is well integrated did not feel a strong orientation towards change. Clan Culture is on this hypothesis, scoring higher than expected. It seems like other dimensions such as Cooperation or communication have a positive impact on this variable. H2 was expecting Clan to be favorable to top management commitment. Effectively, Hotels with Clan culture seem to appear as favorable to it (72.7%). We were surprised to discover that the three other types of cultures had better results than expected. We can make the assumption for future researches that Top Management commitment is not the criteria with most impact. H3 was presenting Clan has being favorable to efficient feedback. The hypothesis is not confirmed (only 27.3% of the Clan hotels consider feedback has been efficient).

However, Adhocracy scores higher than expected (35.7%). We can make the assumption for future research that thanks to a high liberty given to employees in their decisions, employees of Adhocracy cultures find it easier to give feedback to their superiors or to receive feedback from them. H4 and H5 considers that Clan cultures are promoting efficient Communication and Collaboration as well as Interdepartmental cooperation. The hypothesis is confirmed by our results (81.8% of Clan Hotels with well integrated Yield Management consider communication and collaboration are efficient in their organizations), but Market surprisingly shows good results (100.0%) The results also teach us that Hotels with Adhocracy culture are also favorable to a good communication (57.1%). Due to these results, it is difficult to verify our assumptions. The way communication inside the company can help integrate Customer Centric Yield Management could be an interesting subject for future research. H6 is confirmed as we could expect. Adhocracy scores high on this key indicator which isn’t surprising as this kind of organizational culture promotes freedom in the decisions of their employees. We can also make the assumption that this dimension impacts the others (more creativity, flexibility and therefore, more initiatives taken by employees and more confidence in top management). This dimension is the element which surprised us most as Hierarchy should be the culture group with less success in terms of decision freedom as control is one of the main characteristics of this type of culture. H8 is confirmed as Market appears with the most important customer orientation culture, but, other cultures seem to also have satisfying H10 is confirming that staff commitment is favored in Adhocracy Cultures (64.3%) which is in line with previous assumptions. H11 is confirmed as the results show us that Adhocracy favors risk taking more than Adhocracy.

VI/ Discussion: The analysis made through the Organizational Culture Assessment and Revenue Management Integration questionnaires did confirm most of our hypothesis even if some results were surprising. We expected Clan cultures to be the most appropriate in order to integrate Customer-Centric Yield Management. Even if the results confirm the idea that a lot of Clan culture characteristics are positively impacting Revenue Management integration (43.3% of Hotels where we identified Clan culture as being dominant are integrated and 26.9% are aligned), Hotels with Hotels with Adhocracy cultures seem to have integrated it even better. This shows us that some of Adhocracy culture characteristics are essential in order to integrate Customer-Centric Yield Management. The main critical success factor is orientation towards change. Effectively, the majority of hotels who scored high on this dimension consider that Yield Management is well integrated in their structure. The culture type with the lowest percentage of integration also has a really low score (most of their structures are not change orientated). The second success factor that appears essential is the liberty given to employees. Future research could go deeper on this subject, trying to understand how it affects other dimensions. We can see that most of the hotels who scored high on “liberty of decision” also had a high result for feedback as well as staff commitment. It could therefore be interesting to understand how the concept of agility can help a hotel to integrate new functions, such as Yield Management. We were surprised to see that Clan Cultures promote feedback less than adhocracy (we expected a good feedback process in these culture has Clan Cultures promote a family atmosphere which could encourage people to seek and give feedback). However, the answers to our questionnaires confirm that Adhocracy cultures have a tendency to take more risk (in opposition to the lack of initiative in Hierarchy cultures) The results showed us that effectively, Clan and Adhocracy cultures regroup characteristics which are essential to correctly integrate Yield Management and therefore, companies who want to do so should try to modify their culture to develop the Critical Succes Factors identified. Adhocracy seems to be the most appropriate, however, some critical success factors from Clan Culture are important, a mix of both appears as the most efficient solution.


  1. Anthony W. Donovan, “Yield Management in the Airline Industry”, 2015.
  2. Guillermo Gallego and Garett Van Ryzin, “A multiproduct dynamic pricing problem and its applications to network Yield Management”, September 1994.
  3. Cross, Robert G., “Revenue Management: Hard-Core Tactics for Market Domination”, 1997. 
  4. Sheryl E. Kimes, “Perceived Fairness of Yield Management”, February 1994. 
  5. Xuan LornaWang, RossBrennan,“A framework for key account management and revenue management integration”, October 2014.
  6. Rust, Roland T., Katherine N. Lemon, and Valarie A. Zeithaml, “Return on marketing: Using customer equity to focus marketing strategy”. Journal of Marketing 68 (January):109-127, 2004.
  7. Vogt, Christine A., Customer Relationship Management in Tourism: Management Needs and Research Applications. Journal of Travel Research 50 (4):356-364, 2011. 
  8. Edgar H. Schein, “Organizational Culture and Leadership: A dynamic view”. San Francisco: Jossey-Bass. 1985, 1992. 
  9. Bruce M. Tharp, “Four Organizational Culture Types”, 2009
  10. Quinn, Cameron and Rohrbaugh, John, “A spatial model of effectiveness criteria: Towards a competing values approach to organizational analysis”. Management Science, 29(3): 336-377, 1983.
  11. Martin, J., Siehl C., “Organizational Culture and Counter-Culture: An Uneasy Symbiosis. Organizational Dynamics”, 12(2) : 52-64, 1983. 
  12. Louis, M. (1983), “Organizations as Culture-bearing Milieux”, in Pondy L.R., Frost, P.M., Morgan, G., Dandridge, T.C. Organizational Symbolism. Greenwich, CT: JAI, 39-54, 1983. 
  13. Gregory, K., “Native-view Paradigms: Multiple Cultures and Culture Conflicts in Organizations”. Administrative Science Quarterly, 28: 359-376, 1983.
  14. Fevzi Okumus, “Implementation of yield management practices in service organisations: Empirical findings from a major hotel group”, November 2004. 
  15. Sheryl E. Kimes, “Perceived Fairness of Yield Management” from Cornell Hotel and Restaurant Administration Quarterly, Volume: 43, February 1, 2002.
  16. Jones, P. Hamilton, D., “Yield management: putting people in the big picture”, February 1992.
  17. Kevin Donaghy, Una McMahon-Beattie, David Mcdowell, “Implementing yield management: Lessons from the hotel sector”, April 1997.
  18. Maged Ali, Fahed Alduwailah, “The Effect of Organizational Culture on CRM Success”, October 17-18 2013.
  19. Alex Zablah, Danny Bellenger, Wesley James Johnston, “Customer Relationship Management (CRM) Implementation Gaps”, September 2013.
  20.  Rigby, D. K., Reichheld, F. F., and Schefter, P., \”Avoid the Four Perils of CRM\”, Harvard Business Review, 80(2): 101–109, 2002. 
  21. Christopher, M., Payne, A., and Ballantyne, D., \”Relationship marketing\”. Oxford, Butterworth-Heinemann, 1991.
  22. Peck, H., “Building customer relationships through internal marketing: A review of an emerged field.” In A. Payne (Ed.), Advances in relationship marketing (pp. 83– 111). London, Kogan Page, 1995.
  23. Ryals, L. and Knox, S, \”Cross-functional issues in the implementation of relationship marketing through customer relationship management\”, European Management Journal, 19(5): 534– 542, 2001.
  24. Robert K.Griffin, “A categorization scheme for critical success factors of lodging yield management systems” in Department of Hotel, Restaurant, and Travel Administration, University of Massachusetts, MA, U.S.A, 16 December 1999.
  25.  Sparrowe, R. T., “Empowerment in the hospitality industry: an exploration of antecedents and outcomes”, Hospitality Research Journal,17, 3, 51±73, 1994.
  26.  Christine Nolsø Hansen, Klaes Eringa, “Critical success factors in yield management: A development and analysis” in Progress in Turism and Hospitality Research 4(3):229 – 244, September 1998.    

Leave a Reply

Your email address will not be published. Required fields are marked *