Revenue management and the role of personalization

If there is an industry whose economic results are driven, sustained, and largely dictated by customer experience, that industry is travel and hospitality (T&H). In 2022, 66 percent of travel and tourism was booked online and is predicted to grow to 74 percent in 2026 (Statista). Today’s travelers and guests have the hyperability to compare offerings, prices, attributes, ratings, and reviews when searching and booking online. This level of transparency has transformed the traveler and guest experience across the entire customer journey.

Reviews represent travelers’ and guests’ sentiment along each step of that journey. Take accommodations as an example: 96 percent of travelers consider reviews important; 85 percent refer to reviews before making a booking; and 88 percent trust reviews as much as personal recommendations (Siteminder). This means reviews drive consideration and conversion. They can also help hotels increase revenue per available room (RevPar)—76 percent of travelers are willing to pay more for a hotel with a higher rating score. In fact, they are willing to pay up to 35 percent more for a hotel with a 4.4/5 over a 3.9/5 rating (Siteminder).

What is personalization, why does it matter, and how does it relate to revenue management?

At its very essence, effective personalization is perhaps the ultimate practical demonstration of customer centricity. Designing and getting the right content or product to the right customer, in the best channel, at an ideal time, in context, at the right price, and with the relevant extras, before the customer knows or asks for it, is personalization at its best. But what is the return on investment (ROI) of personalization?

Companies that excel in personalization generate 40 percent more revenue from those activities than average players (McKinsey). Today’s consumer does not just appreciate personalization—71 percent expect it as a base service, and 76 percent get frustrated if they don’t receive it (McKinsey).

Yet because of technical, data, cultural, or organizational limitations, many revenue-management (RM) teams or systems in T&H are not yet directly or systematically involved in aligning such a key contribution with bottom-line results.

There are a variety of ways that airlines, hotels, restaurants, casinos, or entertainment venues can offer more personalization. They can unbundle or rebundle their products, create more dynamic menus, provide more delivery options, and develop a portfolio of ancillary options. However, their RM strategy and systems need to quickly evolve to incorporate, predict, and optimize these types of offerings. As an example, Hyatt generated $40M in incremental revenue from personalized offers in the first 6 months of a joint personalization project with Amazon Web Services (AWS).

Implementing personalization requires a single view of the customer throughout the customer journey across the various touch points and consideration stages. Unbundled service attributes—such as “pick your seat,” “late checkout,” “extra luggage,” “lounge access,” “fast track,” “select your room,” “buy on board,” “economy extra,” “food and beverage,” “in-destination activities,” and others—are monetized in different ways. They can be incorporated in a bundle and sold with attribute-based pricing to anchor higher price points in the RM ladder. They can be sold as an extra (ancillary) with different prices, depending on the base fare purchased. Or, they can be promoted as compelling experience-based loyalty program benefits. No matter what option, channel, or combination thereof, RM must become an integral part of the monetization of the customer experience.

By using AWS to architect and incorporate the above complexity into operating mechanisms and algorithms, RM evolves into total revenue management (TRM). By becoming a key component of the customer-experience-and-personalization flywheel, RM will track value, help test innovation, and monetize new products and offerings effectively, thereby helping to fund yet more innovation across the entire customer journey, which will drive more revenue with an above-average flow-through to operating margins.

How the Travel and Hospitality industry can benefit from Amazon’s personalization approach

Amazon has been practicing effective personalization for over 20 years. It has evolved from offering simple “users who bought that also bought this” recommendations to using artificial intelligence (AI) and machine learning (ML) throughout our supply chain and fulfillment process to predict demand for each product sold worldwide to deliver on customers’ expectations of convenience, cost, and delivery speed.

Today, AWS delivers personalization services and solutions for Amazon and our customers at scale. By integrating data, cloud technology, and AI/ML together, with highly specialized teams and Travel and Hospitality Competency Partner solutions, we help travel and hospitality companies deliver the level of innovation, personalization, and customer centricity demanded by today’s travelers and guests.

To learn more about how AWS can help you adopt a total-revenue-management approach, read AWS for RMS: A Modern Approach to Revenue Management in the Cloud.