Revenue management and price optimization in review

Over the last 10 weeks at the Analytic Hospitality Executive, we have explored the topic of Revenue Management and Price Optimization for the hospitality and travel industries.  We’ve looked at how changes in the market, the changing needs of revenue managers and advances in technologies have put pressure on traditional revenue management approaches.

To kick off our theme, Alex Dietz explained the differences between revenue management and price optimization in his posts on Revenue Management vs. Price Optimization: Part One and Part Two. This distinction has been increasingly difficult to make, due to the evolution of revenue management practices and changes in the very definition of revenue management.

I provided an overview of why revenue management systems are just not working anymore, including the conditions in the market today that have fundamentally changed both demand patterns and purchase behavior, the advances in forecasting and optimization technology that have outpaced the analytic capabilities of today’s revenue management systems, and the broader and more strategic role of the revenue manager that means most systems no longer meet all of their needs.

I also explored in more detail how the market has fundamentally changed since revenue management was introduced to hospitality, including becoming more complex and dynamic, and how revenue management systems can no longer cope with these changed market conditions. Alex reviewed why limitations in today’s revenue management systems mean that  revenue management analytics are becoming outdated, and how the changing role of the revenue manager is putting pressure on not just the analytics, but the experience of the user.

I shared that SAS has been researching the problems in revenue management and price optimization for some time, and have used our experience in other industries to rethink pricing and revenue management technology for the hospitality and travel industries.  SAS Revenue Management Price Optimization Analytics is the culmination of that research. Part of the solution to the problems of current revenue management systems is to use advanced technology now available to avoid simplifying assumptions, which I reviewed in “Why Revenue Management needs “big analytics”.” Alex explored the importance of price elasticity, and looked at how to account for competition in revenue management.

Lastly, I caught up with Ravi Mehrotra from IDeaS – A SAS Company, which has been working closely with SAS on the hotel revenue management problem, to talk about how he is thinking about the future of hotel revenue management and his perspective on the work that IDeaS has been doing with SAS.  Ravi specifically highlighted how general purpose optimization problems will not help to solve complex total revenue management problems, and talked about how IDeaS and SAS have created new optimization approaches to account for this complexity.

It has been a very interesting 10 weeks – but, did we miss anything? Are you having any challenges in revenue management and price optimization that have not yet been explored? Let us know – we would love to hear from you.

tags: Hospitality Analytics, Revenue Management and Price Optimization

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