Revenue Managers are often tasked with deploying discounts and promotions in order to boost sales during low periods.
The question that immediately follows these actions is whether the bookings would have been generated regardless of the special or promo. How to count whether or not the promotion was successful involves a little bit of statistics that we will not get into here, except to say that it’s not rocket science.
What is more important is first, how you set up a proper pricing experiment, and then, how you show whether a discount or promotion wass actually effective.
There are five common mistakes that I see Revenue managers make when they are trying to communicate if a pricing tactic worked.
Not using context.
I often see Revenue Managers evaluate the performance of a promotion without putting it in any context. In other words, they might say that a promotion picked up X number of rooms and generated X amount of revenue but they never compare it to any other performance.
Too many Revenue Managers are comfortable assessing pickup as either “good” or “bad” by using their mental model instead of hard numbers. In order to be sure whether a tactic generated significant value or not, it has to be compared to a similar experiment. The problem then becomes what comparison to make.
Comparing different channels.
Comparing promotions and discounts across different channels can be completely deceptive. RM tactics performance should only be compared within the same channel.
For example, since it is highly unlikely that any two channels have the same demand pattern, you should stay away from trying to evaluate whether OTAs react better than the GDS to an advanced booking discount. That type of comparison will inevitably lead to unfounded conclusions.