There is a direct correlation between Revenue Management and Business Intelligence. Pricing and Revenue Management are key drivers behind advanced big data and Business Intelligence initiatives. Why, you may ask? Revenue Management can deliver a huge return on investment with solutions delivering net revenue gains of 2 to 15 percent with negligible incremental costs.
Revenue Management originated in the 1970s with the invention of yield management systems. The 1980s deregulation allowed carriers to enter the market and offer lower fares due to the lower cost structure. American Airlines intensified efforts by implementing what we now call Revenue Management systems. The goal of Revenue Management is to sell the right product, to the right customer, at the right price, leveraging customer behavior, inventory data, price sensitivity, competitive data, and most importantly proprietary analytics.
Business Intelligence technology and skills are a central component of any Revenue Management system. As seen in the typical Revenue Management system architecture illustration below, the foundation is a well-designed and scalable data mart or warehouse with an open architecture that allows for the addition of new data sources and new outputs from the analytic modules.
Business Intelligence is the primary presentation layer for today’s cutting-edge Revenue Management solutions – and why the advantages of the intersection between Business Intelligence and Revenue Management are plentiful.
One real-world example of this is InterContinental Hotels Group (IHG), which was the first in the hotel industry to implement automated price recommendations along with inventory controls. Today, the Revenue Management Group at IHG has evolved to become the forecasting and analytics center of excellence for the entire company. They are the “go-to” team for advanced analytics for marketing, finance, and other business functions.
There are other benefits of this intersection as well. Revenue Management systems help to produce the effective execution of jobs that already exists. In fact, in the hotel industry, Revenue Management technology is reducing headcount by empowering directors of Revenue Management to manage multiple properties, as opposed to the old model of one director per hotel.
A business case built on these returns can fund the development of a data mart or data warehouse, the acquisition of innovative Business Intelligence technology, and the development of new skills in the organization.
These foundational elements – found at the intersection of Business Intelligence and Revenue Management – can fuel an upward spiral in analytics sophistication and the ultimate profitability of the organization.