BrazilThe digital engine behind Simon-Kucher’s travel and leisure work
Last year, global consultancy Simon-Kucher & Partners launched its new solutions business, Engine.
Simon-Kucher Engine consists of a suite of platforms, tools and solutions that help organisations augment and digitise decision-making in three key areas of their business: commercial strategy, sales & marketing and pricing.
Nout van Zon (Senior Manager) leads the Engine proposition in the Netherlands focused on clients in the travel and leisure sector. We asked him five questions about the offering and how it helps the firm’s clients enhance their practice.
What are the solutions currently on offer for leisure and travel companies?
Our key solution is Dynamica Smartrates, a revenue management and pricing solution. Based on cutting edge analytics and industry leading expertise, the software optimizes and automates prices with the aim of maximizing revenue in real time.
Over the past years, we’ve developed over 15 custom built versions of Dynamica Smartrates for clients across the travel and leisure landscape. This has helped them achieve a 2% to 10% uplift in revenue which can be directly traced to the dynamic pricing platform and the complementary consulting expertise we brought to the table.
What project have you personally worked on where such a solution complements – and bolsters – the insights you’ve been able to provide clients?
Take an example at a major European villa tour operator. Before our engagement with them, they had a very manual revenue management process, relying on a multitude of reports and a lot of manual interpretation and forecasting work.
We started the improvement project by conducting a diagnostic to identify the 5 to 10 key opportunities to help grow revenues and profits. This formed the basis of the refreshed commercial strategy.
To subsequently turn strategy-into-action we supported them by developing both the revenue management logic, the system and the front-end web interface. We developed a customized revenue management system that recommends profit-optimal prices and inventory decisions based on daily demand forecast for their numerous villas. A year after the project the villa tour operator reported a 4.3% increase in overall revenue.
Besides boosting commercial uplift, how can Simon-Kucher solution’s also help companies better navigate highly volatile changes in demand?
The Covid-19 pandemic has had a strong impact on how revenue management systems work today in the travel and leisure sector. Pre-pandemic the majority of systems were primarily driven based on historical data. In a very simple form, the system would compare the rate-of-sale with the same time the previous year. Then, variations in year-on-year rate-of-sale would influence pricing.
Obviously the pandemic rendered historically data practically useless. The demand patterns during 2020 and 2021 are a very poor predictor of what consumers will do post-pandemic and 2019 is slowly becoming too far away. Add the current unprecedented levels of inflation and the picture becomes clear: revenue management solutions need to become more agile in their forecasting and cannot only rely on historical bookings.
This is exactly what our solutions aim to do. By complementing historical data with external data sources such as web search traffic, publicly available competitor pricing, Google Trends insights and much more we are able to create a more agile and responsible forecasting algorithm that helps our clients better navigate the increased volatility in demand you see today.
Simon Kucher & Partners operates worldwide. What are some of the engagements the Dutch team is most proud of?
Two engagements our team are most proud of both centre around revenue management and dynamic pricing not only for revenue growth, but also for very social purposes.
In one case, we supported a large cultural venue with increased and optimized price differentiation to allow for more accessible price points without compromising the bottom line. As a result, their concerts have become more accessible for a larger portion of society.
The second case saw our experts support a European public transport provider with implementing dynamic discounts in off-peak hours. This was a challenge, as it required the project team to successfully target the elastic demand in the market. Through a set of pilots we optimized the model and were able to both increase volumes, maintain revenue and decrease the average price of a ticket.
As a result, our client was able to improve the affordability their offering and better compete versus car travel and thereby also contribute to their sustainability goals.
Building on the experiences you’ve gained with Engine, how do you see the role of technology and solutions evolve in the coming years?
Technology and solutions will become increasingly important within commercial strategy, and this will be further fuelled by the current period of inflation. The previous period of strong inflation – in the 1970’s – together with the deregulation of the airline market, let to the introduction of revenue or yield management in the airline industry.
Over time, dynamic pricing has spread from travel and leisure to all kinds of industries such as consumer goods, software and even industrials. Even the grocery sector now embraces the concept – take the very recent news of Albert Heijn where they have now introduced a 25%, 40% or 70% discount on products that are on the verge of reaching their expiry date.
Today’s dynamic and fast-paced market requires businesses to become more agile in their commercial strategy and pricing, with technology and solutions the key enabler. At Simon-Kucher & Partners, we firmly believe in this development and we are convinced that our Engine suite will play a role in future proofing the commercial strategy, pricing and sales of our clients.
