Ten years ago, revenue management was basically a finance guy in the basement office of the hotel looking at historical data, building a forecast or budget in Excel, layering in on-the-books data and recommending a single rate, which was then manually entered into the PMS. Very few universities had revenue management as a core part of their curriculum, and operations and finance people were finding their way around new data, new technology and learning a new discipline.
At the time, I was fresh out of grad school and finding my way around casino revenue departments on the Las Vegas Strip. Back then, the revenue and marketing teams spoke two different languages, and what analytics we could find were cobbled together. OTAs were eating us for lunch, driving both rates and profitability in a downward spiral.
When we met as colleagues at Wynn, Patrick Bosworth and I were both stuck in corporate roles. After a while of prodding, though, I was given enough freedom to construct a revenue team on my own terms. Since we started basically from scratch, it afforded us the opportunity to think outside the box, and our first priority was aligning several departments along the same strategies, data, goals and KPIs. Next, we looked for the ability to price each of our room types and distribution channels independently of each other so we could add even more dynamic pricing.
It turns out many hoteliers across the world were facing the same challenges. A decade later, hotels — particularly large brands and operators — have made significant progress.
The revenue team has moved out of the basement and brings analysis to the table that ultimately shapes sales and marketing strategies. The majority of hotels have embraced some type of automation, where instead of keystroking rate changes on a daily basis across all channels, they've invested in some type of technology to assist. And finally, new data sources have become abundant in the hotel industry, allowing revenue managers to make much more educated and segmented rate decisions.
It's a transformation we commonly refer to as: "From revenue management to Revenue Strategy."
Now it's time for casinos to get on board.
Not because Duetto thinks it's important to running a successful business, or because we want to sell you the tools to bring Revenue Strategy to life. But because the casino industry is changing fast, from less gaming to more entertainment, and from Las Vegas and Atlantic City to destinations across the country. Revenue Strategy is a proven way to shift your operations with little investment to drive more profitability, and frankly could be a necessary action to sustaining your business for the long term.
Look, we already know that the hotel and casino industries are one in the same. Some casinos do not have hotels, but those that do can replicate many of the successes with little to no effort.
Open Pricing - or the idea of dynamically pricing your dates, room types and channels independently of each other - is a no-brainer. This will help you segment your guests further and price each segment appropriately based on their value to your property.
In comparison to hotels, casinos have even more tools and resources at their disposable to make significant impacts to the bottom line. With access to a guest's Average Daily Theoretical or even gaming spend, casinos can combine that data with Open Pricing and begin dynamically customizing offers and rates based on the total value of each customer.
With the right tools, casinos can go beyond the typical comp or no-comp decision and optimize revenue for each booking. Operators can calculate a more appropriate reinvestment number to tailor marketing promotions and enticements.
Hotels didn't jump all the way on the Revenue Strategy train right from the get-go, either. It took developing and adopting strategy best practices, as well as developing or purchasing tools to ingest the demand data, build a forecast, analyze it and send myriad rate recommendations to the right systems. All of those pieces and parts have been evolving over the past decade and will continue to do so.
The cultural shifts — trusting revenue teams to drive decisions, aligning departments around revenue goals, adopting more dynamic pricing strategies — took more time to adapt, and some hotels are still recognizing the value.
This is where casinos seem to hit a roadblock.
A small number are grasping it, and the results show. When you're using the right data and making calculated decisions across departments based on this data, revenues will improve immediately. Cash revenue is the first to jump, but as you start getting the right players in the doors, total player value will follow and soon your higher-rated guests are driving month-over-month profit increases.
Evolving revenue management practices to include new demand signals, automation and predictive analytics was a no-brainer for hotels, and now we're proud that a significant part of the industry has adopted the terminology — and more importantly the practices — of Revenue Strategy and Open Pricing.
It's time casinos start to embrace the future as well, and it starts with adopting a cultural shift toward a more holistic Revenue Strategy. Here's hoping it doesn't take a decade.
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As co-founder and chief marketing and strategy officer for Duetto, Marco guides product vision, direction and implementation. Prior to Duetto, he was Executive Director at Wynn and Encore resorts in Las Vegas, where he founded and managed the Enterprise Strategy Group. Marco was also recently named the Entrepreneur in Residence at Cornell University’s School of Hospitality Administration, and can be seen speaking or lecturing at industry events and hotel schools worldwide.