revenue pricing algorithm

There are many, many components of a successfully integrated and automated Revenue Strategy system, each of which must work together to achieve optimal results.

Often times the most critical things to get right are the least sexy, such as ensuring the right data strings flow seamlessly back and forth between the right systems in the technology stack. But of all components that make up revenue management software, the part that gets the most attention — and the part that I get the most questions about — is the pricing algorithm.

It makes sense, right? An algorithm is a company’s secret sauce. It’s a self-contained, step-by-step set of operations that processes specific data and, based on rules set up by the user, spits out an educated answer. At Duetto, the answer our algorithm recommends is a room rate that has been optimized, based on a number of unique data sets, for the highest bottom-line hotel profitability.

We don’t use the same data or the same algorithm as other revenue management systems. In fact, since we came later than most of our peers, we took a radically different approach to room rate pricing. So here’s a little primer on how Duetto’s pricing algorithm came together and what kind of data is factored in to our pricing recommendations.

Why is Duetto’s Algorithm Different?

I came out of Cornell’s hospitality school with a strong understanding of statistical analysis. Later, while working at both Caesars and Wynn, I was able to begin putting those ideas into practice and automating revenue management where I could.

It didn’t take long to get frustrated with the standard Best Available Rate pricing, where third-party and discounted rates change in lockstep with the BAR. It struck me as completely old-fashioned, and I knew it was alienating my customers and costing my casinos a lot of money.

The legacy RMS systems available at the time were no help either. That’s what drove me to want to develop something better for casino and hotel pricing. So when Patrick Bosworth and I founded Duetto as a consulting practice, it was important to each of us that we create a new way of pricing specifically for hotels. It had to be sensible.

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