To fully understand how the practice of revenue management evolved within the hospitality industry, we have to start with what was a chance encounter between two people named Smith on an American Airlines flight from Los Angeles to New York in 1953.
Cyrus Rowlett “C.R.” Smith, then president of American Airlines, and R. Blair Smith, a senior salesman for IBM based in the Santa Monica office, happened to be seated next to each other on this fateful flight. And C.R. Smith had been grappling with a problem.
At that time, airlines mainly took reservations in person at the airport, in ticket offices and by telephone. Agents used hand-written cards, which meant the system was both inefficient and error-prone. C.R. Smith knew that once a plane took off, the seat inventory was gone. The problem was how to effectively match passenger demand with the number of seats available for any flight, or “leg” in airline parlance, before a plane departed the runway.