IN-DEPTH: Understanding the volume and value of demand for rooms by non-gaming and gaming segments..

Published: 16 Mar 2011

IN-DEPTH: Understanding the volume and value of demand for rooms by non-gaming and gaming segments..

By Ritesh Gupta

Revenue management (RM) specialists recognise that not all guests bring the same level of value to the table - especially in gaming and resort environments.

RM professionals have to discretely forecast demand and revenue by segment. Post this, they work on an optimisation process that ensures that guests are valued not based on what channel they have booked through, but considering their potential profitability.

When it comes to maximising profits by accurately forecasting demand by segment, and setting price and availability restrictions to ensure access to the most valuable customers, the first step is to ensure that the right tools are deployed to collect the required data, says Maunik Thacker, VP Revenue Optimization, The Marina Bay Sands.

The technology exists and it is being used to good effect now, says Thacker, who is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2011, to be held in Singapore (May 18-19, 2011).

“In hotels, the focus is still on room revenues only unfortunately, however, a few companies are beginning to focus on non-room spend as well. Casinos have been doing this for some time now since non-room revenue drives greater profitability in this business due to the sheer volume. Centralised data warehouses exist to capture spend data from different revenue centers which is then analysed accurately in order to understand enterprise value of each segment and each customer. This information is critical in setting price hurdles so that the most valuable customers to the organisation have access to the room,” Thacker said.

Thacker spoke to EyeforTravel’s Ritesh Gupta about demand management analytics, accurate forecasting of future room demand and lot more. Excerpts:

How do you assess the progress made in demand management analytics especially for the gaming sector?

I believe the casino sector has made good progress in harnessing the power of analytics to manage demand. Since casinos generate a significant proportion of their revenues via non-room areas, there has been a great focus on understanding demand for the casino floor and games itself. And with rooms being a key support for generating casino revenues, managers have also used advanced analytics to understand the volume and the value of demand for rooms by non-gaming and gaming segments. It is critical to know the demand from the various segments and what the worth of these segments is, so that the room, which is a precious commodity, is allocated to the most valuable customers.

Casino Managers are also constantly trying to assess the demand on the gaming floor at any given time as this is probably the most important requirement in running a successful casino floor, particularly, the table games area. One needs to ensure the right amount of capacity per game type and minimum bet is available to satisfy the demand from customers visiting the casino. This also allows the casino manager to schedule his dealers and supervisors to ensure that the games are indeed available. This is not an easy task as it can be difficult to measure unconstrained demand since it may not be captured. Methods to measure demand range from the very crude (estimations) to sophisticated (use of technology like RFID chips). However, measuring unconstrained demand still remains a challenge, although progress is being made.

Which according to you is the best way to go about accurate forecasting of future room demand? How can one forecast guest value based on multiple revenue streams across the casino enterprise?

It is very important to ensure the right tools are in place to capture customer spend data at different points of sale. In order to ensure this, a customer has to be encouraged to provide their personal information each time they spend at different points of sale and hence, loyalty & rewards programmes become important. By swiping their card at different points of sales, the organisation can accurately track a customers’ worth during each visit and over their lifetime. This allows the organisation to forecast the volume as well as the value of demand.

Considering the Total Customer Value Rate Setting concept, which not only includes hotel revenues, but also potential revenue from gaming, food and beverage, spa, and other significant profit centres, how do you think the gaming and casino sector has developed business processes and increased their profitability?

Since non-room revenue makes up a significant portion of the casino’s profits, casino operators have long focused on offering rooms to customers based on their total value. In the past, this was based on estimates, however, today these processes have advanced greatly and have become a lot more sophisticated.. Standard processes exist to ensure that accurate data is captured, analysed and decisions based on total value are made. Room rates are set based on expected demand from each business segment, including both casino and non casino segments. The value of that demand is also factored in so that the hurdle price set for each day reflects the expected minimum room and non room revenue for each unit of that demand. And it is not just revenue that is key the metric but profitability from each revenue centre.

Considering that the gaming and casino sector requires different pricing and customer-segmentation approaches, how do you assess the maturity level of RM systems tailor-made for this sector?

There are very few RM systems in my opinion that are set up to forecast and make pricing recommendations based on the value generated by customers in different non room areas, particularly the casino. Most RM systems have focused on hotels and thus serve only those needs. However, with hotels too venturing into pricing based on total customer worth, it becomes very critical for the RM systems to be able to adapt to this requirement. Not many that can do that, exist today.

How has the sector gone about predicting consumer life cycles? What do you recommend when it comes to segmenting customers according to their value, preferences and purchase behaviour?

A lot of work has and is being done in understanding customer value, their expected spend on each visit and their lifetime value to an organisation. Predictive modeling techniques are used to enhance this as well. It is critical to understand the customers’ preferences, buying behavior and what motivates them. Segmenting the customers only based on their value is not enough. There are other variables that need to be factored in as well. The relationship between returns and rewards is important to get right as well.

How can one optimise initiatives focused on up-selling or cross-selling ancillary offerings?

Knowing customer preferences, likes and dislikes is very important if one wants to up-sell and cross-sell various services. Hence, it is very important to be able to capture this information accurately and then use it effectively. The different communication tools used to talk to customers, such as direct mailers, websites, mobile communications, should all be optimised to recognise each customer and provide them with offers based on their preferences. For example, when a customer logs onto your website, he/she should be recognised and the web page should be customised to provide information and offers based on his/her preferences. This will enhance the opportunities for up-selling and cross-selling.

What do you predict will be the biggest talking points of the RM session at TDS Asia 2011?

I hope to hear a lot more about total revenue management and customer value as part of the discussions on the future of RM. I am also hoping to hear how the advent of social media and mobile technology is changing the way we do business and to see how the industry is adapting to this change and making optimum use of it.

Maunik Thacker, VP Revenue Optimization, The Marina Bay Sands is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2011, to be held in Singapore (May 18-19, 2011).

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