The realism of yield management ispresented in the terms of historicaldevelopment, preconditions, ingredients,decision-making variables and boundaries.From this realism the yield segmentationprocess (YSP) emerges. The YSP is a `handson style' of capacity management that suitsthe organisational style and culture of thesmaller and medium sized hotels. The YSP isdescribed as a process rather than a ®xedmethod, a frame of reference that is describedas logical incrementalism. The YSP does notreplace the practises of hotel management,but strengthens existing systems andprocedures. The YSP process is broader thanprescribed methods but is ¯exible as adecision-making support tool for modernhotel management. The YSP provides asequential and comprehensive framework toensure that yield management adds value tomanaging capacity. This, however, presents achallenge to software manufactures whotraditionally have used rate structures andpotential incremental revenue as a basis fordecision-making within yield management.