The Price is Right

The Price is Right

Last week I was moderating Travel Technology Initiative’s Summer Forum that I organised. The subject was Revenue Management. I called the Forum ‘Money for Nothing.’  My thinking was that this is a good title for a revenue management event as the discipline is about conjuring more revenue/profit from an existing, finite inventory. Of course, tour operators might well call the discipline yield management as their inventory might not necessarily be finite. There is always the possibility of laying on more flights or finding some additional hotel accommodation if a certain package or product is selling well. On the other hand, I remember a certain flights specialist that gained an interesting reputation for consolidating flights by cancelling departures and moving passengers over to other flights. This was not well loved by the travel trade with whom they did a considerable amount of business, but it did contribute to making this flights specialist very profitable.

At the Forum, we heard presentations from a hotel group’s director of revenue management and two revenue management consultants, one of whom used to work for one of our largest tour operators.  He talked about the incredible complexity of managing yield in a tour operating environment. He suggested that perhaps you should start with target based yield management, then move to forecast-based, choice-based model and eventually a network optimisation, but the latter might be overkill.

Our hotelier described the topic in much easier terms. She had me wishing I had called the forum “The Price is Right” rather than “Money for Nothing.” She stated the well-known revenue management maxim:

Sell the right product
At the right time
To the right customer
At the right price
To achieve the best profit.

She also spoke about the new discipline of Total Hotel Revenue Management where you are no longer interested in just managing the room inventory but you also want to include the revenue from spas, food & beverage, function rooms, and so on (You can download the presentations from my Events page).

When I started to consider ‘total revenue management,’ whether in the context of a hotel chain, tour operator, airline or any other travel entity, it got me thinking. At the various conferences I have been to, I have seen some fantastic presentations from online analytics experts who are using Google Analytics and other tools to maximise return on investment in online marketing.  I have seen customer data analytics specialists who are working on personalisation and 360 degree customer communications.  Channel management engineers have spoken about maximising profit through analytical channel management.  Marketing executives who are putting out offers and incentives.

It struck me that all these individuals might be working in their own silos and not necessarily coordinating their activities to maximise profit at the company/group level.  They could well be more concerned with justifying their own existence. So should a marketing manager put out a special offer in preference to a revenue managed adjustment in inventory levels or price? Should the revenue manager hold off in his/her decision as the customer data analytics people are about to put out some personalised communications that will drive the customers in?  Who should be in overall charge?  Who is going to coordinate all these activities and do they even have the tools and data to do so?

It seems to me that revenue management might be as much about your organisation and your people as your skill in analytics. What do you think?

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Paul Richer is Senior Partner of Genesys, a management consultancy specialising in providing advice on technology for the travel, tourism and hospitality industries. Genesys has built a worldwide reputation for its knowledge and experience of new system procurement, online technology and strategies including website audits and online booking systems, reviewing and formulating companies’ IT strategies and more. Clients include many of the best known names in travel. Paul has co-authored several reports examining the impact of technology on the distribution of travel, including “Distribution Technology in the Travel Industry” originally published by Financial Times Retail and “Marketing Destinations Online – Strategies for the Information Age” published by the World Tourism Organisation. He has presented at and chaired many online travel conferences, is regularly quoted in the press and has also been invited to make several appearances on television to debate the subject. Prior to founding Genesys in 1994, Paul was Business Development Director of Finite Group plc and Head of the Group’s IT strategy consultancy. He holds an MBA from Cranfield School of Management, is a Fellow of the Institute of Travel & Tourism and Member of the Chartered Institute of Marketing. More information at http://www.genesys.net/

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