The digital engine behind Simon-Kucher’s travel and leisure business

Last year, global advisory firm Simon-Kucher & Partners launched its new solutions business, Engine.

Simon-Kucher Engine consists of a suite of platforms, tools and solutions that help organizations further digitize decision-making in three key areas of their business: business strategy, sales and marketing, and pricing.

Nout van Zon (Senior Manager) leads the Engine offering in the Netherlands and is customer focused in the travel and leisure sector. We asked him five questions about the offer and how it helps the company’s clients improve their practices.

Knot van Zoon, Senior Director, Simon Kucher & Partners

What solutions are currently offered to leisure and travel companies?

Our flagship solution is Dynamica Smartrates, a revenue management and pricing solution. Based on cutting-edge analytics and industry-leading expertise, the software optimizes and automates pricing with the goal of maximizing revenue in real time.

Over the past years, we have developed over 15 customized Dynamica Smartrates for clients across the travel and leisure landscape. This helped them achieve a revenue increase of 2% to 10% that can be directly attributed to our dynamic pricing platform and the complementary advisory expertise we brought to the table.

What project have you personally worked on where this solution complements – and enhances – the insights you were able to provide clients with?

Take the example of a tour operator in a major European villa. Before we were involved with them, they had a manual revenue management process, which relied on many reports and a lot of manual interpretation and forecasting of the business.

We started the optimization project by conducting a diagnosis to identify 5 to 10 key opportunities to help increase revenue and profits. This formed the basis of the updated trading strategy.

To turn strategy into actions later, we supported them by developing revenue management logic, system, and web front-end. We have developed a custom revenue management system that recommends optimal profit rates and inventory decisions based on daily demand forecasts for their many villas. One year into the project, the villa tour operator reported a 4.3% increase in total revenue.

The digital engine behind Simon-Kucher's travel and leisure business

Besides promoting trade upscaling, how can Simon-Kucher’s solution also help companies better deal with highly volatile changes in demand?

The Covid-19 pandemic has had a strong impact on how revenue management systems operate today in the travel and leisure sector. Prior to the pandemic, the majority of systems were driven primarily based on historical data. In a very simple form, the system will compare the sale rate with the same time in the previous year. Then, year-over-year differences in the selling rate will affect pricing.

It is clear that the pandemic has historically rendered data practically useless. Demand patterns during 2020 and 2021 are a very poor indicator of what consumers will do post-pandemic, and 2019 is a long way off. Add in the current unprecedented levels of inflation and the picture becomes clear: Revenue management solutions must become more predictive and cannot rely solely on historical bookings.

This is exactly what our solutions aim to do. By supplementing historical data with external data sources such as web search traffic, publicly available competitor pricing, Google Trends insights and more, we can create a more flexible and responsible forecasting algorithm that helps our customers better navigate the increased volatility in demand you see today.

Simon Kucher & Partners operates all over the world. What are some posts that the Dutch national team is proud of?

The two most important missions that our team is proud of revolve around revenue management and dynamic pricing, not only for revenue growth, but also for very social purposes.

In one case, we subsidized a large cultural venue with increased price differentiation and optimization to allow for more accessible price points without compromising the bottom line. As a result, their concerts are becoming more accessible to a larger part of the community.

The second case saw our experts support a European public transport provider by implementing dynamic discounts during off-peak hours. This was challenging, as it required the project team to successfully target elastic demand in the market. With a combination of pilots, we’ve improved the model and have been able to increase volumes, maintain revenue, and lower average ticket price.

As a result, our customers have been able to improve the affordability they offer and compete better against car travel thus also contributing to their own sustainability goals.

Based on your experiences with the engine, how do you see the role of technology and solutions evolving in the coming years?

Technology and solutions will become increasingly important within the commercial strategy, and this will increase due to the current period of inflation. The earlier period of strong inflation – in the 1970s – combined with the deregulation of the airline market, let’s get into revenue management or returns in the airline industry.

Over time, dynamic pricing has spread from travel and entertainment to all kinds of industries such as consumer goods, software, and even industries. Even the grocery sector is now embracing the concept – take the latest news about Albert Heijn where they are now offering 25%, 40% or 70% off products that are about to reach their expiration date.

Today’s dynamic and fast-paced market requires companies to become more flexible in their business strategy and pricing, with technology and solutions being the main enablers. At Simon-Kucher & Partners, we firmly believe in this development and are convinced that our range of engines will play a role in proving the commercial strategy, pricing and sales of our customers into the future.

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