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The hotel and hospitality sector caters to millions of travelers every day, and each one of them checks in with their own set of expectations. Meeting those expectations is the key to getting people to return, and increasingly hotel and leisure operators are turning to advanced analytics solutions for clues about how to keep their customers happy and boost the revenues throw a best fit pricing policy.
Hot Deals and Profit
Discount travel isn't about cheap vacation packages. Deals are designed to not only save travelers money but also unlock revenues coming from fees.
A clever fees optimization plays the most significant role in profit maximization… and doing it at best is definitely tough.
Pricing Management and Optimization
Pricing Management moves along for three main axes:
- Cost models which predict the positive / negative contribution of gross bookings in P&L
- Competitive market analysis which provides a thorough understanding of the market place in which a company is operating
- Customer price elasticity models which reflect market competition and customer behavior so as to predict the volume of new business and renewal acceptances at various prices for different types of customers
Optimization techniques integrate these models to predict the profit/volume impact of price changes, and to identify the best price changes for a given financial objective and constraints such as:
- Industry outlook
- Seasonal component
- Positive/negative contribution of gross bookings in P&L
- Customers reaction to a fees increase / decrease
- YoY growth in line with the strategic plan
Predictive and Prescriptive Analytics in The Planning Process
Predictive analytics provides estimates about the likelihood of a future outcome. Companies use statistics to forecast what might happen in the future. This is because the foundation of predictive analytics is based on probabilities.
Prescriptive analytics attempt to quantify the effect of future decisions in order to advise on possible outcomes before the decisions are actually made. At their best, prescriptive analytics predicts not only what will happen, but also why it will happen providing recommendations regarding actions.
Predictive and prescriptive analytics can be made simple but it’s not easy. A predictive model requires some math knowledge and good understanding in your business and dedicated software.
A Real Example From The Field
During the summer, Wolters Kluwer CCH Tagetik worked together with a big South American travel agency to integrate predictive and prescriptive analytics in their fees planning process with the following objectives:
- Predict Future Bookings:
- Using industry data and past years
- Combine with the seasonal component
- Recommend Fees To Maximize Profit:
- Evaluate positive/ negative contribution of bookings in P&L
- Evaluate positive/negative customers reaction to new prices
- Keep YoY growth in line with the strategic plan
How We Did It
The CCH Tagetik Platform can technically integrate most of the tools and packaged solutions used for data science and data analysis. This allows us to build, run and test analytical models directly into CCH Tagetik.
The first step was to go through the business model and create a mathematical model that links profit to the business variables which are part of the planning cycle. It’s always funny to find how you can pack complexity in few equations:
Second came the engine: there’s plenty of them, most opensource, but the Rand Python tops the list in terms of features and userbase.
For this specific project our preference went to R, mainly because of it’s the preferred analytics delegate engine from most of the technological players in the market, which ensures the highest portability across different platforms and third party clients.
Having data collected in CCH Tagetik Planning Process and the Analytical Model that runs from the CCH Tagetik workflow, with no data transfer to a third party software or tool, we have put in place a single platform for the whole planning cycle with advanced analytics capabilities.
Grow Together
We have the right platform and the right expertise to boost your business with analytics e.g.:
- Sales forecast
- Capital allocation
- Customers clustering/segmentation
- Costs optimization
- HR planning
- Risk evaluation and many more.
If you have a real business case, contact us today.