Marriott International, Inc., operates and franchises hotels and lodging facilities throughout the world. Its 2009 revenue was just over $10.91 billion. Marriott groups its business into segments according to lodging facility. Major business segments are full-service lodg- ing, select-service lodging, extended-stay lodging, and timeshare properties. Marriott states that its three top corporate priorities are profitability, preference, and growth.
In the mid-1980s, the airlines developed the concept of revenue management, which adjusts prices in accor- dance with demand. The idea gained prominence in the airline industry, because an unoccupied seat represents revenue that is forever lost. Unlike a part in inventory, an unoccupied seat on today's flight cannot be sold tomor- row. Similarly, in the lodging industry today's unoccu- pied hotel room cannot be sold tomorrow. So, for hotels revenue management translates to raising prices on Monday when a convention is in town and lowering them on Saturday in the dead of winter when few travel- ers are in sight.
Marriott had developed two different revenue- management systems, one for its premium hotels and a second one for its lower-priced properties. It devel- oped both of these systems using pre-Internet tech- nology; systems upgrades required installing updates locally. The local updates were expensive and prob- lematic. Also, the two systems required two separate interfaces for entering prices into the centralized reservation system.
In the late-1990s, Marriott embarked on a project to create a single revenue-management system that could be used by all of its properties. The new system, called OneSystem, was developed in-house, using a process similar to those you learned about in Chapter 10.
The IS professionals understood the importance of user involvement, and they formed a joint IS-business user team that developed the business case for the new sys- tem and jointly managed its development. The team was careful to provide constant communication to the system's future users, and it used prototypes to identify problem areas early. Training is a continuing activity for all Marriott employees, and the company integrated training facilities into the new system.
OneSystem recommends prices for each room, given the day, date, current reservation levels, and his- tory. Each hotel property has a revenue manager who can override these recommendations. Either way, the prices are communicated directly to the centralized reservation system. OneSystem uses Internet technol- ogy so that when the company makes upgrades to the system it makes them only at the Web servers, not at the individual hotels. This strategy saves considerable maintenance cost, activity, and frustration.
OneSystem computes the theoretical maximum revenue for each property and compares actual results to that maximum. Using OneSystem, the company has increased the ratio of actual to theoreti- cal revenue from 83 to 91 percent. That increase of 8 percentage points has translated into a substantial increase in revenues.
Source: Case based on www.cio.com/article/119209/The_Price_Is_ Always_Right (accessed June 2010).
1. How does OneSystem contribute to Marriott's objectives?
2. What are the advantages of having one revenue- management system instead of two? Consider both users and the IS department in your answer.