- Revenue DiagnosticTM (Hospitality)
A large luxury destination club was experiencing demand imbalances and low member satisfaction. In collaboration with Revenue Analytics, they found opportunities to improve asset utilization, demand forecasting methodology and promotion targeting, resulting in over $42M in potential revenue uplift.
- Revenue DiagnosticTM (Cruise Lines)
Traditionally a leader in the Revenue Management space, a cruise line operator was experiencing slower growth due to market conditions. They aligned with Revenue Analytics to identify areas of opportunity in forecasting, group and inventory management and pricing, and also conducted a comparative study of RM best practices through a Revenue Management ScorecardTM. In total, potential revenue benefits from identified opportunities exceeded $200M in incremental annual revenue.
- Forecasting
A large hospitality company sought to improve their legacy Revenue Management system's transient and group forecasts. Working with Revenue Analytics, they enhanced their forecasts by adjusting the methodology to reduce forecast error and automate the forecasting process. The resulting outcome was an 18% improvement in forecast accuracy and a 1% uplift in overall revenue.
- Quick Hit Alerts and Reports
Revenue managers at a leading hospitality company were using disparate data sources to manually analyze everyday RM performance. They partnered with Revenue Analytics to create standardized alerts and reports to automate analysis, resulting in an estimated 0.25% revenue uplift.
- Price Optimization
Already utilizing yield optimization, a large hospitality client wanted to advance one step further by optimizing hundreds of thousands of yearly rates. They partnered with Revenue Analytics to develop a price optimization capability that would incorporate competitive data, price sensitivity and demand forecasting into a dynamic rate recommendation, resulting in a 2.7% incremental revenue uplift.
Revenue Analytics' principals pioneered the application of sophisticated Pricing and Revenue Management techniques. At the time, these developments were hailed as a salvation for industries with perishable inventory, increasing revenue and profits by more accurately forecasting demand and controlling the price and availability of inventory based on customer willingness-to-pay.
Since then, problems of intensifying competition and chronic overcapacity have not only persisted, but have been accentuated by relentless advances in consumer visibility into price, product and channel alternatives. Many of the early approaches to the problem, while still relevant, lag the dynamic changes in the marketplace.
Revenue Analytics has been proactive in assisting its clients in generating new Pricing and Revenue Management capabilities to stay ahead of the rapidly changing market. One award-winning system was the very first to dynamically measure the responsiveness of consumers to price changes and simultaneously optimize prices based upon consumer response, competitive rates and capacity constraints, making price a competitive weapon.
Another strategically crucial capability is Enterprise Forecasting which incorporates macro-economic factors, price elasticity and statistical unconstraining of demand to give clients keener insight into future demand for their products.
Enterprise Forecasting
Granular demand forecasting gives insight into day-to-day demand for a product but lacks the long-term vision into total business demand. In developing enterprise forecasting, we work with our clients to:
- Forecast all demand / revenue streams, inclusive of ancillary products, group business, food & beverage, function space and other revenues
- Develop multi-level forecast views for use by different functional groups – Sales, Marketing, Operations, Revenue Management and senior executives
- Design a consistent and repeatable approach to incorporating advanced analytics, including price sensitivity and statistical unconstrained demand
- Create organizational buy-in to ensure the enterprise forecast is the single forecast used across the company
Forecast Accuracy Measurement
Many pricing and inventory decisions are made based on the demand forecast, but many companies do not have insight into the accuracy of their forecast. We leverage various statistical techniques with our clients to:
- Implement repeatable and automated metrics to monitor forecast accuracy
- Create forecast accuracy alerts and reports for end users
- Develop business processes to incorporate forecast accuracy measurement into Pricing and Revenue Management decisions
Group Management & Rate Optimization
Group business is a large source of revenue for many firms in the hospitality and travel industries, but generally lags transient business in terms of sophistication of Revenue Management capabilities and processes. Using historical data, we work with our clients to:
- Develop granular group demand forecasts using statistical unconstraining and other methodologies
- Recommend group targets and execute group wash factors
- Incorporate win probability and price sensitivity to recommend an optimal group bid rate
- Create business processes and reports to incorporate changes to group business into daily decisions
Inventory Control Optimization
Proper management of perishable inventory is critical to maximizing revenues. Different types of inventory and changing demand mix greatly complicate an already complex process. Based on historical data including demand patterns, we work with clients to:
- Create capabilities that recommend closing and opening of inventory, retaining some inventory for late purchase
- Recommend “hurdle points” or rate thresholds at which prices below should not be available for selling
- Set selling limits and determine appropriate oversell amount to account for cancellations and other lost sales
- Develop a system to automatically open and close inventory with ability for users to manually override changes
Market Response Modeling
For travel and hospitality companies, predicting how customers will respond to price points, discounts or promotions is educated guesswork. By conducting statistical analysis at a granular level, market response models can be developed for predicting these behaviors. Our analytical approach is to leverage historic sales data, product data, competitive rate data, customer data and other available data sources to:
- Predict how customers will respond to various price points and discount levels and identify ways to incorporate these models into decision processes
- Leverage market response models to identify product level opportunities for price increases or tactical price reductions to stimulate demand
- Incorporate competitive prices and potential competitive price changes into the market response model
- Identify areas to utilize loyalty programs most profitably
Retail / Transient Price Optimization
With thousands of offerings and the diverse preferences of individual consumers, companies in the travel and hospitality industry struggle to determine pricing that maximizes contribution. Understanding price responsiveness by micro-market segment and cross-product interactions is key to improving pricing and profitability in this industry. We partner with clients to design custom price optimization models and processes that:
- Incorporate price sensitivity, competitive pricing and demand-to-come, as well as external factors such as industry capacity
- Provide clear, actionable price recommendations for end users
- Allow a transparent view into key price drivers behind recommendations, rather than a “black box” solution
- Include a comprehensive change management process to identify challenges and constraints, generate visibility, build consensus and lay a foundation for success
Pricing and Revenue Management Scorecard TM
An objective, comprehensive, and quantitative assessment of Pricing and Revenue Management strengths and weaknesses in comparison to the competition and Revenue Management best practices is a powerful tool and a strategic advantage. With our Pricing and Revenue Management ScorecardTM, we benchmark the core business competencies of organization, systems, analytical tools, processes and practices, and strategy to:
- Perform comprehensive evaluation of the current state of Revenue Management
- Provide insight into competitive structure, techniques and strategies in the form of quantitative and qualitative metrics
- Rank current Revenue Management practices versus the competitive set and cross-industry Revenue Management best practices
- Incorporate recommendations for elimination of gaps and weaknesses into a transformational plan