EFT Amsterdam SpecialPricing variables continue to change. And to seek and quantity the dynamics is science, to apply it more of an art.

Published: 07 Dec 2006

EFT Amsterdam Special

Pricing variables continue to change. And to seek and quantity the dynamics is science, to apply it more of an art.

Pricing variables continue to change. And to seek and quantity the dynamics is science, to apply it more of an art. In all decision making the data (science) ultimately should be confirmed by a human decision maker, and that’s an art.

This is the viewpoint of Riko van Santen, director - electronic distribution and IT, Golden Tulip, when queried about pricing and it being a matter of science and art.

In an interview with EyeforTravel.com’s Ritesh Gupta, van Santen spoke about changes in RM, availability of scientific methods, rate parity and other issues. Excerpts:

What kind of changes have you witnessed from revenue management perspective?

The largest change is that of a rate hurdle-based thinking to a dynamic (price elastic) pricing. Hotels have more flexibity in pricing, but it brings new challenges in terms of system interfacing.

How do you assess current scientific methods available today for a hotel to establish a superior pricing strategy?

Automated RMS providers have sophisticated engines to help crunch data, and market conditions such as competitor sets seem to now fit in the equation.

RM executives feel what is missing is the ability to truly optimise dynamic pricing or floating rates and to apply the contracted ceiling rates when applicable. More development needs to be conducted when optimising a floating rate code that automatically manipulates multiple rate codes across multiple market segments and is purchased by multiple types of customers. Do you agree with this?

Delta factors are for example not yet integrated fully in “system to system” interfaces. In particluar to distribution platforms this becomes an issue when price elasticity setting is desired above the traditional rate level controls.

Hotels are claiming that their pricing is same on any given particular day across various distribution channels. Is this applicable to your company?

Yes, we offer rate parity. We believe this brings clarity to the already transparent market and thus builds guest trust in the brand.

This is not an issue to automated distribution networks linked to our Central Reservations System, Goldres.

What are the pressures that various distribution channels apply to your pricing?

We believe that rate parity and clear agreements in partnerships will avoid pressure on pricing. International distribution raises issues such as currency exchange rates, local taxes and charges that may affect selling prices.

How do we understand elasticity and apply it to pricing different products?

First we need to quantify the reaction to price fluctuations and filter other possible factors influencing demand. Lead time plays an important role in terms of distribution - one channel may have a stronger elasticity coympared to another.

And if hotels have lower price elasticity, can they really expect to stimulate consumer demand through price changes?

Difficult, but possible: at any given moment the different lead times may offer alternative elasticity for the same arrival date.

What initiative have you planned in the year to come?

We look to integrate price elastic modelling though distribution interfaces. Furthermore by expanding into new channels of distributing the best available rate, we may tap into different models. The sooner new channels are sought and modelled, the better the analysis and understanding of it.