Dynamic pricing and value generation in hospitality sector, Jan Kamenicek, TravelClick
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Transcript of Dynamic pricing and value generation in hospitality sector, Jan Kamenicek, TravelClick
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Dynamic pricing and value generation in hospitality sector
Slovenian Marketing
Conference
Jan Kamenicek
Regional Director
Eastern Europe
5/30/2014
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Agenda
Specifics of service/hospitality operations
Challenges hospitality companies face in pricing
Tools available to hospitality sector helping understand and predict demand
Solutions hospitality companies should use to implement efficient pricing decisions
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Hospitality sector
specifics
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Intangibility
Destination A: $800
Destination B: $300
Pricing depends on intangible factors such as popularity of the destination, hotel, prevailing economic and social
climate, logical comparison impossible
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Fragmented Macro Supply
In the vast majority of destinations typically no market leader that could dictate the price
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Constrained Micro Supply
Depending on the season the hotels may be too small (and start rejecting reservation requests) or too big (and launch activities to sell excess supply)
Unsold room on a given day is an opportunity cost (like a stale yogurt), an unsold room
on 27.5.2014 will never be resold
The value of “X” reservations rejected due to a sold out status minus the value of “X” last reservations still accepted before the sold out status represents an opportunity cost
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Human Factor
Actual service delivered by people, the least controllable asset. With the growing importance of
social networks and review sites the human factor plays a crucial role in the pricing decisions
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Challenges hospitality
companies face in
pricing
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Increased dependence on exogenous factors
Political situation
The impact of the exogenous factors on hospitality pricing decisions is more significant than with other
(primarily non-service) industries
Outbreak of epidemics (SARS)
Exchange rate volatiliity
Accessibility of the destination
Government incentives
Events in the destination
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Dissonance in the purchase/consumption
process
Purchase decision
Actual purchase
Experience Hospitality
Consumer Goods
Purchase decision
Actual purchase & Experience
Consumer Goods
Purchase decision & Actual purchase & Experience
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Behavioural segmentation
High Price Sensitivity
Low Price Sensitivity
Low Demand Predictability
High Demand Predictability
Meetings, Events
Congress
Corporate
Airline , Crews
Individual transient
Group business
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Fragmented distribution
The heterogeneity of distribution makes it stressful for hotels to maintain correct rates across all channels
Source: VFM/Leonardo
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When pricing hotels need to consider:
Target segments When these
segments typically book
What is the general price level in the
market
What external circumstances play
in hotel’s favour
Key is the forward looking approach
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Tools available to
hospitality sector
helping understand
and predict demand
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Future competitive segment information
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Competitive segment information
On most of the dates the hotel is running under full occupancy and at occupancy level up to 40%
lower than the competition
Group and Retail segment underpenetrated, hotel is focusing on lower margin segments such
as wholesale and corporate (negotiated)
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Competitive segment information
The hotel has an opportunity in group segment on 17 and 18 Oct. The competition is running at a relatively high occupancy on these days and 1/3 of
their sold capacity is allocated to groups. The hotel can offer a higher rate to any potential group request
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Bookings made versus actual arrivals
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What rates do my competitors sell at?
Real time future rates available to review and correlate with actual hotel occupancy, forecast and competitors’ segmentation
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Solutions hospitality
companies should use
to implement efficient
pricing decisions
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Efficient channel management
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Efficient channel management
GDS Hotel Web
Booking Engine Online Travel
Intermediaries
Central reservation system management (CRS)
Property Management System
(PMS)
Centralized updates of all E-channels from CRS or PMS (hotels can choose)
All bookings are automatically sent into PMS