Revenue Management forecasting techniques traditionally use the past to predict the future. But what do you do when yesterday was like never before? And what does “back to normal” look like?
As politicians grapple with the return of international travel, the opening of borders and a return to “normal”, those in the forecasting game get to thinking about what “normal” means and how it might return.
The traditional method of using the past to predict the future becomes an impossibility when something unprecedented like the global pandemic occurs, and the future is consequently just as uncertain.
So, what are the questions that need to be answered and what resources can you use to have the best shot at optimising your revenue?
What is normal?
What do you hope to achieve? For revenue managers that simply means what demand at what price? But, to get to that simple answer you need to dig a little deeper. Will the demand come from traditional or new market segments? For instance, will the composition of your new normal customer base be more domestic demand, or do you expect a stronger rebound from international customers? Where should the marketing team focus their efforts? Unfortunately, there is no universal answer. The truth will be different for every business in every location.
When is normal?
Will the return of demand to your new normal be swift or gradual? Is that past regular corporate traveller going to continue to travel to that next business meeting, or have they discovered that Zoom meetings are just as effective and widely accepted now, also affording increased time to service more customers rather than spending time travelling to and from meetings?
Will airlines ramp up their old schedules quickly or will schedules change to suit the new normal, and will it take time to hire new crew as needed?
Is there strong pent-up demand that will be released or will people be a little more cautious and wait to see how things go? How will the emergence of a new variant impact consumer behaviour?
The 1950’s is looked on as a boom time which came about partly because of the end of rations and other wartime restrictions from World War II. Although a major difference with the pandemic is the ongoing uncertainty and risk of imposed restrictions, are there any parallels with our situation today?
What do people care about?
Over the last twenty years, the airline and accommodation industries have become reliant on low price “use it or lose it” bookings. Has the level of uncertainty in recent times caused people to think differently about cancellation fees and non-refundable bookings?
When we eventually see a resurgence in travel, will customers be prepared to and now more inclined to pay a little more for the security of a refundable fare? Terms and conditions that customers previously dismissed as an “it’ll never happen to me” situation may be viewed very differently moving forward. Getting your terms and conditions right may become a very important consideration for people looking to make a booking. What terms and conditions in your organisation could you adapt to make your product more attractive?
The fine print isn’t the only non-price aspect of your business that people may care about. A property with a strong reputation for cleanliness and for being well-maintained has the potential to bring more business your way. What are your businesses other competitive advantages that people might now start caring more about?
What’s right for me?
Now that you have an idea of the problems you have to solve, where do you go for the answers? The good news is that there are just two places to search. Locally and globally.
The local search involves understanding who your customers are in your business. Are they the same types of customers you had two years ago or has your business adapted to reach a new audience? Are they predominantly families or couples, old or young?
How do you think these core customer groups will behave in the future? What are your key local competitors doing? Are they ahead of the game and trying new things or are they lagging behind and just reverting to the same old thing, providing you with an opportunity? What is happening to other cost drivers that affect your customers?
For instance, if you run a holiday park, will high fuel prices impact people’s decisions to take a driving holiday? Or will the re-opening of local attractions and open spaces make your location highly desirable? How has your community responded to local catastrophes in the past like floods, bushfires, and cyclones? And don’t forget to jump into your customers’ shoes and consider how you would behave as a customer.
The global part of the equation is a search to learn from similar and relevant experiences. Are there people that you can reach out to overseas who you can learn from? Are there articles or studies that might provide some information or new ideas? There are thousands of newspapers around the world writing stories and articles every day. What are our governments doing? Will their actions help or hinder your business?
The next year or two will be full of continued and new challenges for everyone who forecasts and predicts as a part of their daily jobs. Sometimes we will get it right, and sometimes we will get it wrong. The key is to ask the right questions and make rational decisions with as much widely sourced information available at the time and always continue to monitor, review and pivot as needed.
By Martin Hadfield ARMA