Revenue Management: the levers that can destroy value

Revenue Management (RM) is known to be the practice that works every time when you want to maximise your revenues, in both the campsite and tourist residence sectors. Dynamic Pricing, channel management, length-of-stay management, inter-mobile-home overbooking… There’s no shortage of feedback praising their virtues.

But when used incorrectly, some of these levers can be disastrous, generating more losses than gains.

Here’s an overview.

Segmentation, but beware of product over-segmentation

It is legitimate to want to enhance the value of a particular property. But it’s not a good idea to systematically turn these special features into categories in their own right.

A large number of categories with very low stock levels can result in a loss of what was thought to be gained in terms of stock value at the start of the marketing process. Customers get lost, it is difficult to maintain price consistency between products, and management becomes impossible with stocks that are too small to be easily predictable. Ultimately, it’s a lot of configuration work for products that are difficult to distribute, pricer, yielder and animate.

We have repeatedly measured over-segmented sites (with more than 25 categories) that end up performing less well than the same sites with a simpler, more aggregated product.

Generally speaking, sea views are good value, as are products that are clearly different in terms of surface area and range. The rest require more caution.

Flexibility, but beware of being too flexible in high season

Similarly, offering greater flexibility with free arrivals in high season, hoping to fill up well with an optimal « tetris », may present more risks than gains.

In fact, when you are able to fill the high season with full-week stays (7, 14, 21 nights), occupancy is maximised. Opening up short breaks or free arrivals in order to sell at a higher price runs the risk of filling up much less because you need to be sure that a 3-night stay will be followed by a 4-night stay. But forecasting by date of arrival/duration of stay is highly uncertain. What you may gain in average price, you risk losing in volume.

Short stays and free arrivals should therefore be favoured during the low season.

Allotments, but beware of non-anticipation

Distributed well in advance at a very fine level of granularity (by account/site/room type/week), their purpose is to encourage Tour Operators or Works Councils to market the product. But realisation rates remain extremely low, below 20% on average in the industry, generating stock freezes and a much reduced ability to manage. Opening up all stocks to free sale rather than allotment does not generally reduce availability. On the contrary, it increases it because all the players have access to a large part of the stock.

In companies that have significantly reduced allotments, there is a greater ability to manage third-party distribution. Higher volumes are generated in the low and medium seasons, and there is greater scope for yielder during peak full stops.

So yes to RM. However, value creation must be proven from start to finish. And this must take into account all the dimensions of sales management.

Keywords: Revenue Management, yielder, segmentation, flexibility, allotment,