Generating and compensating demand. Increasing profits!

by Jordi Oller | novembre 1, 2017 7:03 pm

The old Yield/Revenue Management idea of a single demand curve is over. We have to generate demand/s with new segments. We have to compensate current demand with the new ones. We have to increase profits. We have to reinvent Yield/Revenue Management.
The other day, I shared with you a couple of tweets where I quoted two sentences from this book[1]

The two sentences were…
1) “Revenue Management: A Path to Increased Profits”. PROFITS!!! Clear?[2]
2) “…adding the creation and direction of demand to the present #revenuemanagement focus of managing current demand”. Waves Management!!! Clear?[3]
Why did I highlight this sentences from this book?
Because, I Touristologistly believe, that they represent something fundamental AND usually missing in nowadays training, consultancy, practice of Yield/Revenue Management.
First, the focus on pricing techniques (that are very interesting, except when they are just… mark down the price with low occupancy!) and not the focus on profit.
Second AND MORE IMPORTANT, paying all the attention on CURRENT demand and a lack of focus on demand generation from NEW segments. Segments with different patterns that you can seduce in different ways in order that they appear in your Hotel/Tourism enterprise when is more convenient to you. Furthermore, you can compensate high demand of one of the segments with low demand of the others AND THE OTHER WAY AROUND. So, compensate low demand of one of the segments with high demand of the others. We are wave managers[4], remember? Here you can see a graphic representing waves compensation!

WavesCompensation[5]Let’s see an example about waves compensation. We can think about Shangri-la[6] … they have a problem of low occupancy (better to say a problem of less than desirable profit? YES!!!) during weekends because most of their customers are business people.
They Touristologistly make the most of nowadays social tendency… I want to be the best professional BUT ALSO THE BEST Parent!!!
So, you can promote to your customers… use you hard earned points of OUR loyalty program to appear in OUR hotel during weekends and enjoy especial activities for your kids. Not only you are a great professional you are the parent of the month! By the way, good example of Versions Of Me[7]!!! The business people doesn’t appear during the weekends BUT yes, the lovely parent!
You can read this article [8]and see how they are practicing these ideas.
“In 2017 Shangri-La Hotel, Shenyang, in Shenyang China, launched its second round of “K20 Activities.” This two-day training program, available to travelers and locals, pairs up to 20 children ages five to twelve with professionals at the property for fun “training” sessions that provide insight into the in’s and out’s of luxury hotel operations.” Interesting practice Shangri-la!!!
At the end of the day, these two ideas conveyed in the two sentences that we have been talking about (improving profits and discovering new segments) are highly connected. When you have new segments, you can sell to them complementary products, as a matter of fact, F&B or beds can be the complementary ones because, for specific segments, the principal components of the product are related with their main motivation.
It can be good service and attitude with their dog as we saw in this example about Disney [9]OR to enjoy doing your favorite activity surrounded with people that like it or want to be a professional or they are already professionals on it… like the example of Chip Conley’s[10] first specialized hotel on Rock music lovers and based on Rolling Stone magazine !!! It is obvious, that in those scenarios, the possibility to sell these extra activities and the basic ones without a discount will increase your TRevPar.
We can also use Long Tail theory [11]for these specialized segments… that means to appear in specialized places where you will pay lower commissions/prices and sometimes don’t pay them at all. Let’s see two examples…
For instance, if you create a tour for architects from architect’s point of view, visiting the city where you have your hotel, offering also possibilities to sign in an internship with a local architect studio, etc. You can use Long Tail Theory and try to promote and distribute your package in any Architects university around the world. This promotion and distribution can be a win to win situation for everybody! Here[12] you can find more information about special packages for Architects.
The same can happens, if you create a specialized package for grandparents travelling with their grandkids where you teach mathematics (a fun review for the grandkids and an opportunity for the grandparents to become the perfect tutor) or teaching basic coding to develop a native mobile app (where the kids will be the tutors!!!) to appear in a specialized social networking site as can also generate, again, this win to win situation!
All these actions will also increase your GopPar! More opportunities to generate extra revenues, or commissions for special activities, less cost of promotion and distribution… I love the application of long tail theory in Touristology!!!
Yield/Revenue management is changing a lot and we need YOU to create, improve, define these changes!!! As Alan Kay says “The best way to predict the future is to invent it”!!!! We are Touristologist! We do that!!!
Do you want to join US? I will be here, in the cloud, waiting for you!!!!

  1. book:
  2. “Revenue Management: A Path to Increased Profits”. PROFITS!!! Clear?:
  3. “…adding the creation and direction of demand to the present #revenuemanagement focus of managing current demand”. Waves Management!!! Clear?:
  4. wave managers:
  5. [Image]:
  6. Shangri-la:
  7. Versions Of Me:
  8. article :
  9. Disney :
  10. Chip Conley’s:
  11. Long Tail theory :
  12. Here:

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