This week I presented at Hotel Market Seminars in Stockholm #HMS2019 (full video at the end of this post - apologies for the quality).
This is a summary of the presentation I gave for all those who weren't able to attend. I hope you enjoy it!
Why does Pace exist?
Pace was founded in late 2016 to democratise dynamic pricing. As three founders we brought with us over 30 years of combined experience in tech, venture capital and aviation. In early 2017, 6 months later, on popular demand, we moved into the hospitality industry.
We've now been hard at work in the hospitality industry for less than two years and we're excited about what we've achieved:
- over 500,000 price pushes through our infrastructure
- more than £100 million of revenue under management
- amazing team with industry-leading advisors
- certified integrations with MEWS, Opera and protel
But the real question is not what we're doing. But why we're doing it. Why does Pace exist? What is our mission?
Pace was started, and moved into hotel revenue management because we have three foundational beliefs about the future of the industry. We believe revenue management will radically change in the below ways over the next 5-10 years. We also believe that there is no solution that is building for the future we see. That's our role, we are building a solution for the future we believe will unfold.
If we are wrong, you won't remember our name in 5 years. But if we are right we will be one of the global leaders in revenue management.
Moving to Primary Data
We use the terms Primary Data and Secondary data to distinguish between two very different approaches to revenue management. Secondary Data is what other people know about your customers. Primary Data is what you know about them.
Rate shopping is an example of secondary data - it tells you how your competition is perceiving the market. There are some companies in the industry trying to convince us that we the more data the better: rate shopping, airport traffic, weather data. This is wrong: adding secondary data sources to algorithms is like adding opinions to a conversation - unless you know who is right it is just adding noise.
Primary Data, on the other hand, is data on your actual customers and business. You have hundreds of thousands of bookings in your solution, both historical and advance. Modern statistical analysis can do more with these than you can imagine. This data is clean, hyper-relevant and, very importantly, real-time.
Moving to Continuous Pricing
Manu, many processes in revenue management are manual today. In many cases, even where people speak of automation there are manual rules which generate the automation.
Isn’t it interesting that many hotels price by buckets or matrices, or that they only review prices at certain points during the week? Or that their manual rules and pricing strategy is only evaluated during certain times?
Demand is global and constantly changing
Wouldn’t it make more sense if we could simulate every possible future scenario. Then pick the one that looks likely to give us a better outcome? This would be a little like having a Dustin Hoffman in Rain Man next to us in the casino counting cards.
This is already possible - we call it Continuous Pricing. It is possible to evaluate recent bookings in close to real-time (currently every hour) and build probabilistic forecasts for each of the following combinations: - each room type - each room night - each day in the booking window - each price-point
Let's work on Action First
How do you measure your team? How do you measure the success of your tools? In almost every other area of business measurement is shifting towards actions.
By focusing on actions we mean looking at whether the right actions are being taken - at the right time. Do we have the processes and tools to facilitate action in our teams? High-performing athletes don’t focus on their ultimate goal. They break the activity down into actions and then become amazingly good at those actions.
The key takeaway here is that achieving the best possible result as a hotel does not mean hitting a pre-defined budget. It means taking the optimal decisions every day, every hour, to extract the most value out of the market you're in.