Comparing and Contrasting Industry Problems with Revenue Optimisation

April 27, 2016
Blog

This post by our revenue expert, Kamesh Shukla,  originally appeared on LinkedIn pulse. 

Hospitality and airline industries are considered to be the epitome of best practices in pricing and revenue management. In the battle to gain competitive advantage alongside high yields, sophisticated software suites are deployed by them to forecast demand, manage inventory and monitor competitor prices. Yet technology, no matter how refined, is just an enabler of a broader business strategy.

“Variable costs may only amount to around 10 – 20% of the price, remainder being fixed cost and profit!” – HOSPA

This triggers a question.

How to build a revenue-based business case to support technology spends in this price-intensive industry?

Pricing is a marketing activity and technology evidently enables it to respond instantaneously. Planned investment drives commercial strategies that are further fortified by holistic views of assessment and revenue management (or RM). Such technically enabled decisions augment crucial revenue related functions.

Key characteristics of a comprehensive and technical RM effort, and its incorporation into management programs are as listed below

  • In order to instinctively determine what segments produce better flow-through, profitability (along with ancillary revenues) are tracked by market segment.
  • To optimize all revenue streams for both tactical and strategic influence, the revenue management tool’s role gets stretched.
  • Industry metrics like RevPAR, Occupancy and ADR are tracked by room type to clearly identify suboptimal value propositions.
  • Unnecessary business spends are drilled down by the revenue center.
  • In order to identify, monitor and mitigate lost revenue opportunities, methodical tracking of upgrades are done.

Businesses with the following characteristics can apply the above revenue optimization solutions.

  • Bear fixed and limited capacity which indicates that a limited amount of product is available.
  • Possess a perishable inventory that builds up unused product that cannot be resold.
  • Have segmentable customers or consumer groups that place different values on the products.
  •  Display high fixed costs yet comparatively low variable costs.
  • Show demand patterns that vary with time and lack the ability to forecast these patterns.

A commercial frame in pricing and revenue management helps to identify the routes and guide day-to-day activities. Stringent commercial strategies are ideally defined to increase revenue. To be relevant and stay aligned with business goals, this should be set within a deep understanding of commercial objectives in terms of brand positioning.

In the lap of revenue optimization

A powerful revenue management suite like Unity by RateGain enables hotels, online travel agents, airlines, car rental companies, cruise liners as well as tour operators and wholesalers, to secure their most valuable customers. To increase profitability, revenue managers can use automated unification solutions to carry out the below enlisted tasks.

  • Accurately forecast demand and guest value to all areas of the enterprise.
  • Leverage cyclical patterns to optimize revenue and profitability.
  • Maximize the total customer value of demand during peak travel times.

The solution: an undeniable deal

“Revenue management causes revenue gains of 2 to 8% and profit increases of 50 to 100%.” -Decisioncraft

Some of the world’s most successful travel and hospitality companies as well as industry-leading B2B and B2C distribution-focused companies, use unified revenue optimization software. This intuitive tool ensures that customers stay profitable and competitive at the same time, through turn-key optimization powered by advanced forecasting methodologies.

 

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