Revenue management is something that�s been a success story for hotels, cruises, cinemas and spas. Besides my work experience in all these industries, what�s common?
The concept is not new, the airlines have been using it and often considered as an epitome. The airline industry spends heavily on sophisticated systems for forecasting demands, managing availability and forecasting the right pricing. This varies depending on the time you fly, the destination, the events and season and of course, how early you book. The pricing is managed differently not just for the airlines you choose to fly but the model of aircraft as well.
In the good old food and beverage ERA the revenue drivers in hotels used to be the restaurants, bars and banquets. While they still remain a focus the new stars are the Revenue managers and the hotel rooms' sales team.�The hotel industry mushroomed and the key driver was revenue management. The strategy was very much straight forward - �sell the right room to the right customer at the right time at the right price on the right platform�.In short the Revenue Manager is expected to know the cliental, season and market demand.
Selling in cruise industry is even more sophisticated as Itineraries and pricing are published for two to three years in advance. The key factor for revenue management enhancement here is the port of call, no of sea-days, onboard offerings and shore excursions. Yes! there are different cruise companies who target different cliental segment and cater to their demand.
The cinema industry is no different and the seats here are highly perishable. To bring you
to reality, let me ask a question - �Will you buy a movie ticket if they were to offer you a discount 5 minutes after the movie has started�.�The movie industry caters to all segments of the market. The factors that drive the revenue management on the front end are fairly simple - Day of the week, Time slots classified as morning, matinee, afternoon and late evening, Type of seats. The back end, however, is very complex. The revenue managers in a cinema are able to drive revenue and footfall by delivering the right content (the movie people would be interested to watch), in right quantity (no. of shows), at the right time (show timings) to the right audience.
The spa industry is no different. The revenue management dynamics does change depending on whether the spa is operating out of�a hotel, resort, mall, stand-alone, cruises or an airport. The revenue managements is mostly managed with a value add on or a discount. Visibility, Membership, packages, promotions and loyalty plays a key role.
To summarize Revenue Management is a combination of qualitative and quantitative approach.
Pricing
- Profit maximization
- Dynamic
- Dual entitlement and price fairness perceptions
- Best available rate
Understanding and Forecasting demand
- Knowing your clients
- Profile segmenting
- The geographical background
- The past and current data analysis
- Business potential day and dates
Controlling distribution channel
- Offline sales
- Online sales
- Group sales
Marketing
- Customer behavior
- Competitor analysis
- Weather
Common Key Performance Indicators (KPIs)
- Occupancy
- Average rate daily/ weekly/ monthly
- Revenue from occupied inventory
- Potential revenue that can be generated from remaining inventory
- Refusal/opportunity lost
- Comparison report (Year on year /Season to season /Segment to segment)
�An Analyst, the pricing team and commercial sales manager� who know the local flavors are the ones who must deliver the perfect supply to meet the demand at the perfect equilibrium.
Mr. Ved Prakash Sharma is Vice President of Iayasa Spa, SP Jain School of Global Management
