Revenue Management by Predictive Analytics Posted on : Mar 24 - 2015

Cruise lines are turning more to advanced revenue management systems driven by piles of data and predictive analytics.

“We have worked with cruise lines to enhance their revenue management and pricing techniques that they have had in place since the early to mid-1990s,” said Matt Busch, partner at Revenue Analytics,.

According to Busch, cruise lines have typically taken more traditional approaches, looking at available inventory and opening and closing cabin categories as necessary.

“They didn’t have the tools to tell them ‘This price makes sense in your market, and this is how we expect customers to react,’” he said.

Using predictive analytics can help avoid last minute price drops through better data modeling. Enter Atlanta-based Revenue Analytics.

“The industry is coming off a long journey of recovery,” continued Busch. “There was a cycle of desperation with last minute price dropping, really destructive competition, and sales.

“Cruise lines have, generally speaking, embraced the idea of revenue management from an inventory perspective and started to understand booking behaviors and segmentation. The industry has learned a lot, and there is a lot of embedded data in terms of what to do and what not to do.”

For example, Busch explained, demand may spike for shorter Caribbean sailings between four and six weeks out, and traditionally, lines had a poor understanding of demand at certain points based on price.

One big question facing operators is how to drive demand.

“There are trade off decisions beyond price,” added Busch. Those could include disguising outright discounts with onboard credits, or ticket price reductions for the second guest.

“That is something to expect going forward: maintaining integrity and avoiding destructive price competition,” he noted. “I don’t think anyone wants to be the JCPenney of the cruise industry.

“One important thing is to understand how demand responds to your price position,” Busch said. Source