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Demand & Supply Chain Management Evolution


     
Case Study Detail
Language: English

CARLSON HOTELS: Carlson Hotels maximizes revenue and profits with help from JDA

 
 
 

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 Carlson Hotels

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Market transparency and the rapid growth of Internet bookings have led to a new price war in the hospitality industry, creating significant challenges for hotel operators. Even with Carlson Hotels’ worldwide reputation for service and quality, the company is constantly looking for ways to differentiate itself — and maximize its revenue — in this competitive, price-driven environment.

“In 2008 and 2009, we began to realize that the traditional market segmentation in our industry had collapsed with the move online, at the same time occupancy rates were plummeting as the economy tanked,” said Frederic Deschamps, vice president of global revenue optimization at Carlson Hotels. “Consumers were using the Internet and other distribution channels to evaluate their hotel options based solely on price, and not on quality. Every purchase was starting to gravitate toward the lowest available rate, with fierce competition across an industry with half-empty hotels. We knew that we had a pricing problem during the downturn — but we also wanted the capability to price better when a high-demand period presented itself.”

When market conditions lead to fewer sold-out nights, traditional yield management is only sporadically effective. For Carlson Hotels, that signaled an opportunity for positive change. “We needed a more sophisticated method of matching rates to actual demand so we could measure our success based not only on occupancy rates, but also on the revenues generated by individual bookings — and the value of ‘missed opportunities’ caused by quoting higher prices during a low-demand cycle,” said Deschamps.

After determining that its hoteliers needed to understand the price at which their hotels would make the most money on all future booking nights, Carlson Hotels turned to JDA Software for a radically different approach. They embarked on a new revenue optimization project called SNAP, which stands for stay night automated pricing, to drive higher revenue for its hoteliers using JDA Demand and JDA Travel Price Optimization. Carlson Hotels is now able to quantify price elasticity and use that output to generate optimal prices, bringing competitor data into its revenue management system and forecasting how customers will respond to price changes.

 

 





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