Enhancing yield management with customer profitability analysis

Argues that in order to sustain the long‐term profitability and growth of hotel organizations, yield management decisions must incorporate two critical constraints: the cost implications of the customer mix and guest ancillary spend. Proposes that customer profitability analysis (CPA), which reports revenues, costs and profit by customer group, will give management the ancillary spend and cost information that will enhance customer mix decisions over a long‐term horizon. Identifies that the key to CPA lies in the application of an appropriate method of allocating costs to customers and proposes that activity‐based costing is the optimal costing solution.