Reference no: EM131816978

Marriott International, Inc., operates and franchises hotels and lodging facilities throughout the world. Its 2007 revenue was just over $12.9 billion. Marriott groups its business into segments according to lodging facility. Major business segments are full-service lodging, 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 accordance 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 tomorrow. Similarly, in the lodging industry, today's unoccupied 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 travelers are in sight. Marriott had developed two different revenuemanagement systems, one for its premium hotels and a second for its lower-priced properties. It developed both of these systems using pre-Internet technology; systems upgrades required installing updates locally.

The local updates were expensive and problematic. 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 One Yield, was custom developed in-house, using a process similar to the SDLC you learned about in Chapter 10. The IT professionals understood the importance of user involvement, and they formed a joint IT-business user team that developed the business case for the new system 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. One Yield recommends prices for each room, given the day, date, current reservation levels, and history. Each hotel property has a revenue manager who can override these recommendations. Either way, the prices are communicated directly to the centralized reservation system.

One Yield uses Web-based technology 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. One Yield computes the theoretical maximum revenue for each property and compares actual results to that maximum. Using One Yield, the company has increased the ratio of actual to theoretical revenue from 83 to 91 percent. That increase of 8 percentage points has translated into a substantial increase in revenues.

Questions

1. How does One Yield 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.

3. At the same time it was developing One Yield in house, Marriott chose to outsource its human relations information system. Why would it choose to develop one system in-house but outsource the other? Consider the following factors in your answer.

• Marriott's objectives

• The nature of the systems

• The uniqueness of each system to Marriott

• Marriott's in-house expertise

4. How did outsourcing HR contribute to the success of One Yield?

5. Summarize the reasons why a company would choose to outsource rather than develop a system in-house.