Development of an activity-based customer profitability system for yield management

Customer profitability analysis (CPA) is a technique that provides management with customer-related information which will enable them to manage yield from a profit perspective. The information obtained from CPA will guide long-term marketing, product development and capacity management decisions to yield a customer mix that will generate the greatest returns. This paper proposes a systematic approach to the implementation of CPA in a hotel environment that uses activity-based costing in the assignment of costs to customers. The systems development cycle, methods used to gather and interpret information at each stage of the cycle and issues arising during the development process are discussed. © 1998 John Wiley & Sons, Ltd.