I went to middle and high school in central Florida, and it was during this time that I learned to love rides, attractions, and all things theme park. When my physics class announced that we would be going to Busch Gardens Tampa Bay as a field trip, I was totally stoked. Little did I know what lay ahead.
As part of this field trip, we were to ride roller coasters and measure all the forces that we’d studied that year: centrifugal force, G-force, speed, and so much more. It seemed like it would be so exhilarating to know all the stats of each ride we took. Then the field trip came, and to make a long story short, I learned that the ride was best enjoyed without all the equipment and knowledge of everything happening around me. The tons of data, or noise, if you will, didn’t add value to the experience. It made me a more anxious rider and reduced the intended outcome of the entire experience: fun.
Just like me anticipating the field trip, people often confuse noise with valuable information.
The Noise in Revenue Management Software
Revenue management software aims to maximize revenue and inform revenue managers. However, as I look at the landscape of revenue management software on the market, there is often noise that doesn’t serve those two main objectives very well. One area where you see a lot of noise is around casino control segments.
For those of you not in casino yield, revenue leaders in this space often segment the database of loyal patrons into control segments that roughly indicate the worth of a patron. Many revenue management software solutions on the market will show pick-up by the control segment. Having and using control segments to yield a casino resort hotel is essential; however, showing pick-up by a segment on the dashboard is essentially noise to the operator. Let’s dive into why we believe this.
Why Control Segments Don’t Need to Be Tracked
In our blog post last week, we discussed how a parity between casino player worth and cash rate is essential to casino resort hotel yield. Mechanically, casino control segments are essential to making this parity possible. In this approach, a player’s control segment is opened only when the hurdle rate is at or below their player's worth. This means that when we use the segments to allow booking, any guest who books will meet or exceed the hurdle rate on any given night. Therefore, any pick-up outside the lowest segment that’s open will bring more value than is required on any given night. It’s a bonus when we get it, but it's not something that needs to be tracked or monitored.
For example, we might ask why there are so many more control segment four guests than control segment three guests next Thursday. What value is there in answering that question, as both were at or above the threshold to get a room for that night when they booked? Ultimately, we are filling the hotel, and the rate is protected. If we don’t have high VIP pick-up on any given night, that is not a problem to solve through yield.
When we yield correctly, we fill inventory at the highest possible rate. When we equip our operators with pick-up by control segment in the revenue management dashboard, they feel compelled to act on this information. As such, they might be prone to unnecessary action, such as trying to stimulate a higher control segment to book on a given night when it’s not necessary to incentivize that action. This is why HouseCount runs and yields on control segments but doesn’t have them visible on our dashboard. We want to empower users with helpful information and not just extra data for the sake of more information.
Reducing Noise for Greater Autonomy
Those following along with our previous blog posts might remember we talked extensively about competitor prices. Another area where noise often arises in revenue management software is competitor pricing and price overrides. If your resort is priced 15% above the market due to factors like strong group sales or a solid reputation, knowing in real-time that you’re above market prices doesn’t necessarily help with decision-making. Suppose you’re comfortable with your position and velocity against prior years. In that case, knowing what the competitors are doing is merely noise, helpful in some contexts, but not vital for in-the-moment decisions.
Price overrides in typical systems can be frustrating. Many systems allow overrides, but the system doesn’t let them continue, automatically reverting to the original algorithm. This is unnecessary noise, as it assumes the system knows best, not the operator. At HouseCount, our system considers the user knows best, allowing user-generated overrides to persist and yield adjustments to occur from that new baseline.
One of the most important priorities in our HouseCount system is simplicity, with a focus on autonomy. Reducing unnecessary noise, we empower operators to focus on maximizing revenue and making informed decisions, taking revenue management software to the next level.
