Announcing, “The Solution”: SAS Revenue Management Price Optimization Analytics

Those of you who have been loyally following “The Analytic Hospitality Executive” know that we haven’t typically talked about problems without presenting solutions.  You may have been surprised to see us discussing all of these issues with “today’s” revenue management systems, painting such a dire picture of the state of revenue management without providing any insight into how to solve these issues.  Well, of course we have an answer for you!  This week we are announcing the availability of a brand new product, SAS Revenue Management Price Optimization Analytics, and throughout the rest of the month we’ll be discussing how this new analytic package will help overcome the weaknesses in today’s revenue management systems that we’ve talked about over the past month.

We did a considerable amount of research over the last few years, and leveraged SAS’s experience in price optimization for the retail industry to rethink pricing and revenue management technology.  Alex and I will spend the rest of the month going into detail on features and benefits, but I wanted to talk a bit about our overall goals and approach to put the later discussions into context.

We took a very different approach when designing this product.  Our goal was to design a set of analytics that could solve revenue management and price optimization problems leveraging the most cutting edge research and practice available, but we wanted to make the analytics flexible and configurable to solve any hospitality, travel, sports or entertainment problem.  We wanted to get away from the “square-peg, round-hole” problem that was created when the industry tried to make revenue management systems designed for the airline industry fit other industries. We also wanted to help revenue management move away from a focus on tactical opening and closing of rates to a more holistic and strategic view of pricing.  To enable this, we needed a powerful but flexible base of pricing analytics for tactical pricing decisions, along with analytical tools that can facilitate a more strategic approach.

Our product does not come with a fixed UI or a fixed data integration structure.  We did this purposely to ensure that we could incorporate whatever data an industry, or an individual company, needs to optimize pricing strategies.  Staying away from a fixed UI means users can decide how they want to view the information.  They can design strategies or workflows they think would work best for their users and their business strategy and goals. This flexibility facilitates either a phased approach to implementation or a smoother change management process – which ensures user acceptance.

Now, reading between the lines, our analytic hospitality executive recognizes that with this flexible approach you’ll either be building a completely new, custom revenue management solution or replacing the analytics layer in an existing one.  Therefore, the product is especially suited for mid to large hospitality, travel, sports and entertainment companies that meet one or more of the following criteria:

  • No “off the shelf” solutions exist for the sub-industry
  • Unique business characteristics that, if incorporated in the RM system, will result in substantial value
  • A desire to maintain internal control of a proprietary revenue management and price optimization solution as a strategic asset for the firm
  • Want to replace only the analytics in an existing system, preserving existing UIs and workflows

Our testing has shown that this analytic approach will provide gains of at least 2% over the 4-7% revenue lift from traditional revenue management analytics.  We actually expect that most companies would do better than this.  We all know that revenue lift from better pricing drops straight to the bottom line, so this could mean substantial gains for large companies.  Because we have provided improvements in tactical pricing, along with facilitating the strategic approach described above, companies have the opportunity to improve their competitive position, create a more sustainable revenue stream in line with a longer term business strategy, and become much more attractive to investors, stakeholders or the franchisee community.

We are very excited to share more details about the results of our research, and we look forward to hearing your impressions of the work we’ve done.

tags: Hospitality Analytics, Revenue Management and Price Optimization

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