Though this may be the first time for many tour operators hearing of revenue management, it isn't completely new to the industry. There are operators around the world who have already seen, tested and successfully adopted revenue management strategies from airlines and hotels.
What is revenue management? Read our previous post that explains this in detail.
In hotels, revenue management is a commonly used practise to sell smart. With the right execution, you can sell the right products to the right person for the right price at the right time through the right channels with the best commission efficiency.
Early moves adopted by tour & activity operators
Revenue management can work for tours & activity operators as they have:
- Fixed capacity
- A perishable product
- A product that can be priced differently
- Evolving demand
- A product that can be sold in advance
- Markets that can be segmented
In this post, we will look at 3 examples of revenue management from tour & activity operators.
1. Dynamic Pricing - LAAX Ski Resort, Switzerland
We're told that the tours & activities industry can't use dynamic pricing. It just doesn't work. In 2018/19, LAAX & Flims Ski Resort proved that belief wrong as they introduced dynamic pricing for their daily ski passes based on previous years' of data. They reduced prices on quieter time slots and days while increasing prices on busier time slots and days.
What I liked in particular about their strategy is LAAX were very open about this price model to potential customers... and it worked! Who wouldn't want a quiet slope at a reduced price?
With dynamic pricing, you can offer reduced pricing or add-ons to promote your quieter slots, or add special events or separate tours at a higher price for key dates.
2. Direct Booking Incentives - Park Guell
Similar to airline and hotel providers, tour & activity operators will never have a budget to outbid Online Travel Agencies. Instead, operators need to leverage OTA 'lookers' and transform them into direct website 'bookers'.
To increase direct bookings, you need have an engaging website, a calendar with live availability to 'book now' and (most importantly) a reason to book direct. Park Guell in Barcelona offers three clear reasons for a customer to book direct.
- You should book directly on their website or at their office to guarantee your ticket.
- An additional tour is included only if you book direct and in advance.
- If exit intent is detected whilst you are on their website, a pop up will appear to offer 8% discount to confirm your booking that day.
3. Distribution Based on Demand - Van Gogh Museum
The Van Gogh Museum struggled with volume as they had large queues from both OTA and ticket office bookings. Sometimes, there can be too much of a good thing.
As an extreme example of distribution management due to surging visitor volume, the Van Gogh Museum had an algorithm created based on their previous years' of data. This allowed them to anticipate demand and split their daily ticket allocation between their ticket office and OTAs. Distribution based on demand has now increased customer satisfaction and almost eliminated queue time during guest visits.
With your booking system, you should be aware of your peak periods and your shoulder months, and when you have enough volume in-destination or when you need to reach potential customers overseas. This data will allow you to decide when to allocate a more availability to OTAs, or when you can sell direct and take a higher profit.