Revenue Management is on a roll. Originating in the airline industry in the mid-1980s, the practice spread to a number of sectors in the 2000s and continues to expand inexorably. First came the hotel and cruise industry, then the railways, car hire, advertising agencies, and more recently campsites and buses. Revenue Management now touches on – almost – every perishable sector.
In practical terms, what is Revenue Management?
Put simply, it involves « selling at the right price, to the right customer, at the right time » in order to maximise sales. The main and best-known lever is dynamic pricing, which involves adapting prices to changes in demand. But Yield has many other levers: optimising sales channels, length of stay and overbooking, to name but a few.
It has a vast field of application, but it tends to be reserved for sectors where the offer is said to be perishable. It has to be non-stockable: you can’t stock tonight’s hotel night or this weekend’s concert date. Once the date has passed, there’s nothing you can do about it. The question is different for yoghurts or toothpaste because there is less urgency to sell.
Revenue Management is entering new sectors
Here are 5 emerging sectors in Revenue Management.
1) Parkings
The Hamon law on quarter-hourly pricing (2015) was the trigger. Operators were obliged to review their pricing structures. The smartest (and biggest) took advantage of the situation to introduce revenue management: incentives to reserve a parking space, seasonal pricing, degressive pricing according to parking time, etc. It’s still early days, but the momentum is there.
2) The concierge services
With the development of platforms such as AirBnB and Abritel, private individuals can now entrust the management of their property to concierge services. The difficulty lies in the multitude of unit stocks to be managed, which makes forecasting and optimisation difficult. The key is to aggregate stocks into homogeneous clusters. This will make it possible to identify trends by period, by geographical area and by type of property.
3) The VTCs
The uberisation of the transport sector has given rise to a multitude of players who are trying to differentiate themselves through their services, but also through their prices. Revenue management models are interesting because they have two sides to the coin: the aim is to maximise revenue from journeys, but also to attract as many drivers as possible. But finding the right balance is tricky. A high price gives more scope to pay drivers well and build up a large network (a key element of success), but these same high prices also drive customers away. It’s a mixed approach in which the pricing policy must be considered in conjunction with the driver remuneration policy.
4) The sport
All venues offering sporting competitions are starting to differentiate their prices: for example, the Olympic Games or football clubs. Golf courses and tennis camps are also starting to do so. The stakes are different in each case. For golf courses or tennis camps, the approach is fairly traditional, with a strong seasonal element and prices that adjust to the rhythm of bookings. For sports competitions, forecasting demand is a real challenge. At a football stadium, for example, demand can depend on a number of factors (high-stakes matches, team rankings or form, etc.).
5) Museums and historic monuments
In the vast field of ticketing in general, with sectors that have already taken the step to Yield (theatres, leisure parks, sports venues), the movement is slowly beginning in museums and monuments. Access to the TV tower in Berlin and the Word Trade Center in New York is already highly digitised, with time-stamped tickets and fewer and fewer tickets sold on site. Prices are seasonal and are beginning to be managed using dynamic pricing.
In some cases, Revenue Management is even helping to deal with overtourism.
In conclusion, RM still has a long way to go. And so does N&C, because we are working in each of these sectors and are delighted to have broken new ground in many of them.
Keywords: New sectors, Revenue Management, dynamic pricing, parkings, concierge services, VTC, sport, museum, pricing management, forecasting
