Revenue management and beach facilities
Who says that revenue management can be applied only to airlines, means of transport or hotels?
As we have often argued in our revenue economy and open revenue concepts, revenue management principles can be applied to a myriad of business sectors that possess certain characteristics, namely:
- High fixed costs
- Low variable costs
- Foreseeable demand
- Perishable assets
- Limited inventory
And beach facilities are included among these sectors. In this article we want to present, for your consideration, the case history of Pelikano Beach Club, a facility with almost 400 sun umbrellas located on the coastal area of Vieste, holiday destination par excellence of Apulia and Italy, which utilizes our revenue management consulting services.
Although revenue management and dynamic pricing techniques applied to beach facilities are subject to variables, parameters and factors which are quite different to those of hotels, from distribution channels (online and offline) to the range of pricing dynamics and booking windows, the results are similar, that is to say, remarkable.
The graph below shows the evolution of this facility’s performance from 2018 (without revenue management) to 2019 and 2020 (with revenue management). We could pinpoint as a key parameter not only the growth of the umbrella occupancy rate over the whole season, but also that of the ADR (average daily rate) and REVpar, or REVpau if you prefer (revenue per available umbrella), which links the two previous values (occupancy and ADR).
As shown in the graph, there are clear differences between the results achieved without revenue management in 2018 (static monthly price list, lack of visibility and online distribution, use of conventional channels such as seasonal subscriptions, customer base comprised of repeat, local and passers-by customers), and the results achieved with revenue management in 2019 and 2020 (rate differentiation based on statistical data analysis, pricing dynamics in accordance with demand and occupancy, sourcing and profiling of new offline channels, use of online channels and specific sales and e-commerce platforms like Cocobuk, targeted social communication, etc.).
And as is the case with hotels, the commercial activity conducted during the low season with penetration rates to increase occupancy and word of mouth online through excellent reviews on social platforms and meta search engines (Facebook, Google, TripAdvisor, etc.) allowed the facility to work on the average daily rate during high and peak season (middle weeks of August).
This led to a widening of the price range between low and high season, which increased from a ratio of 1:2,5 in 2018 (10-25 euros) to a ratio of 1:5 in 2020 (7-35 euros). With a 50% turnover increase in two years.
This result takes on even greater significance in 2020, taking into account the Covid pandemic and the need to operate at reduced capacity due to spacing guidelines regulating the distance between rows of sun umbrellas.
This case history is just one of many examples of the results that revenue management can yield when its implementation is skillfully attuned to beach facilities and other various business sectors.