By Dan Skodol
An area of opportunity where the three commercial disciplines converge more so than others is event space. Like hotel rooms, restaurant seats, spa treatment rooms, and other types of time-based, perishable inventory, event space shares many of the conditions that are conducive to the application of Revenue Management:
- Relatively low variable cost, relatively high fixed cost structure
- Seasonal, varying demand levels
- Flexible pricing structure
- Advance reservations
- Fixed capacity
On top of these ideal conditions, add a focused, funnel-driven, outbound Sales effort that arguably doesn’t exist for something like transient hotel bookings or restaurant reservations and provides a source for rich data that can be captured at various stages of the demand funnel. Commercial leaders with oversight over event and function space can use this to their advantage; for instance, as opposed to simply anticipating event bookings, analysts might attempt to forecast top-of-funnel leads and comprehend the factors that might impact conversion, especially at a business segment and/or venue level, but notably also at a lead level. The outcomes of this can inform cohesive strategy and tactics across Sales, Marketing, and Revenue Management, while mitigating the need for each area to be chasing down their own data and analysis to support decision-making that could very well be at odds with the others.
Like most “non-traditional” applications of revenue management, effectively applying the discipline to event space is not without its nuances and challenges. For example, a limited transaction volume is sure to keep forecasting experts up at night, and constrained inventory – effectively a “capacity of one” in most cases – makes it difficult to apply the concept of “optimal mix” that is integral to constrained situations in hotels and similar environments. Commercial strategists are counting on the one and only booking they accept into a unit of inventory being the very best piece of business they could have booked into that space at that particular time.
The weddings industry adds even more depth and dynamic to the puzzle. Long lead times are common, meaning that results are nearly set in stone going forward as much as a year, such that the focus of commercial teams needs to stay considerably ahead of the game. Rate hurdles that might typically be deployed by hotels translate to minimum spend requirements, though the latter could be met through a combination of a fixed venue fee and a per-guest package price, each with their own implications for cost structure and margin. While repeat business is nearly (and hopefully!) non-existent, demand is reliable – people will forever get married – and parties will often overspend their budget to the benefit of the venue. Promotions are leveraged as the booking window begins to close and inventory is at greater risk of spoilage, though other shorter lead-time events such as corporate and social gatherings can also help to absorb inventory on shorter notice.
How might technology be able to support these efforts and further evolve the collaboration amongst commercial strategy teams when optimizing event space? As is always the case, it starts with the data. As mentioned above, the presence of robust prospect-level data provides an opportunity to combine CRM efforts with advanced analytics. In many hotels room revenue and marketing situations today, this may only go as far as measuring and tracking engagement and conversion data, and even these efforts are hampered by privacy restrictions and a somewhat vague idea of the size, composition, and characteristics of your pipeline. In place of a trial-and-error approach to targeting the database with broad offers and tracking the impact on conversion and revenue after the fact, an operator could, for instance, deploy predictive and prescriptive modeling at a lead level to assess or “score” the likelihood for each lead to book a certain product. This in turn can inform segmentation, targeting, promotions, and so forth by marketing, enhance the accuracy of the forecast used by revenue management for yielding and pricing, and arm sales with an action plan for outbound and one-to-one interactions. When supported by the right data, advanced analytics can even help estimate price sensitivity across target segments, essential for truly optimal revenue management decisions.
Possible applications of this approach to support commercial efforts with analytics extend well beyond wedding venues and similar event spaces. We can simply broaden our definitions of “space” and “event,” thinking about each term much more loosely, where “space” can include any time-based, perishable unit of inventory, and “event” can mean any transaction of value that we want to occur in said space. For example, we might consider poolside cabanas in Las Vegas, which in fact share some characteristics in common with wedding venues, such as minimum spend requirements and the ability to break down availability into day parts (morning, afternoon, evening, etc.). Vacation rental units – which, like event space, are limited in capacity and each have unique characteristics – are another unconventional opportunity. Even a seat at a slot machine in a casino can be considered in the same conversation. The common thread that enhances the traditional, more siloed, application of technology to support commercial strategy is the ability to obtain and leverage rich data at various stages of the demand funnel and apply advanced analytics with the goals of all commercial stakeholders in mind.
Please stay tuned for a review of the key metrics that commercial teams should consider as part of the effort to optimize event space using advanced analytics.
