Improving Revenue Management in the 21st Century
to Create Price-Boosting Revenue Strategy Tools
|ROCKVILLE, Md. –February 21, 2006 – Manugistics
Group, Inc. (NASDAQ:MANU), a leading global provider of supply
chain and revenue
management solutions, today announced that Manugistics Chief Scientist
and Director of Operations Research Dr. Jon Higbie Ph.D., has co-authored
a groundbreaking paper on Revenue Management practices for the hospitality
industry in the 21st Century. Higbie’s work was created in cooperation
with a number of educators at the Georgia Institute of Technology’s College
of Management and several hospitality industry professionals.
The paper, titled “A Comparison of Unconstraining Methods to Improve Revenue Management Systems,” focuses on how hotels can increase profitability by more accurately forecasting demand from third-party channels.
“The travel industry is in a period of healthy expansion, and effective Revenue Management is the key to greater profitability,” said Higbie. “However, the increasing number of travelers using PDA’s and the Internet to book reservations is causing a problem for conventional Revenue Management strategies.”
Until recently, call centers accounted for 70 to 80 percent of all hotel reservations. Today, that number is only about 30 percent. As hotel companies receive a growing majority of bookings from outside their own reservation offices they are unable to measure lost demand accurately thereby increasing uncertainty in price setting.
“When hotel companies have limited information on why potential customers are not converting, it is impossible to accurately forecast price sensitivity or demand,” said Higbie. “Distribution channels are rapidly evolving in the digital age. To optimize pricing, it is essential that operators have a realistic idea of the future demand from these channels; we call this ‘demand unconstraining’. Unconstrained demand is simply bookings plus denials. But without information on why customers walk away, it is difficult to know how to set rates correctly.”
Higbie and his colleagues solved this problem by developing a set of statistical tools that let hotel companies more accurately forecast demand from various customer segments in third-party channels. Based on experience in the airline industry, the result of switching to a better unconstraining method could increase revenue 2 to 12 percent.
The collaborative research, the first of its kind for the hospitality industry, was jointly conducted by Manugistics and the Pricing and Revenue Management Initiative at the Georgia Institute of Technology led by Dr. Mark Ferguson.
“In the past when a booking channel sold out its allotted capacity, sales data stopped,” said Ferguson. “Together, Manugistics and Georgia Tech developed a variety of statistical tools to accurately estimate demand by channel, allowing hotel companies to better manage demand. If the tools are applied correctly, they will enable hotel operators and other travel companies to increase revenue per available room (RevPAR) and profitability.”
For more than 20 years Manugistics has helped the world’s leading hotel, resort and gaming companies improve their profits through best-of-breed demand and revenue management solutions. The Manugistics Hospitality Revenue Management Suite (HRMS) can synthesize revenue coming into a property from any channel, including a company’s global distribution services (GDS), central reservation office (CRO), or website; and all segments such as group, transient, corporate and leisure. It also factors in such multiple revenue sources as guest rooms, meeting space, food & beverage (F&B), spa, and casinos to develop true profit optimization for a total revenue picture. The Manugistics Revenue Management Suite is an integrated platform that provides forecasting, optimization, collaboration and reporting for one property or a worldwide chain.
For more information about Manugistics hospitality solutions or a copy of the white paper collaboration, “A Comparison of Unconstraining Methods to Improve Revenue Management Systems,” please visit: www.manu.com/industries/tth/collateral.aspx or contact firstname.lastname@example.org.
Manugistics Revenue Management Group
About Manugistics Group, Inc.
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