Marios Prokopiou wrote this article.
When a travel provider’s commercial functions operate in a silo, with each section having its own key performance indicators and metrics, and its own data sets in different databases, it creates headaches for commercial executives. Isolated decisions made by the heads of commercial functions exacerbate the problem. Instead of focusing on profitability, each commercial function often ends up shaping and implementing models that focus on revenue. Inefficiencies, uncoordinated decisions and high costs abound.
For example, one airline revenue management executive successfully implemented a sophisticated airline-wide network revenue management system on time and on budget. Yet the sales and loyalty department executives unconsciously sabotaged the effectiveness of the new system in producing the expected results since they were using their own tools to control parts of the inventory.
This happens all of the time. Hotel loyalty executives often argue that revenue management doesn’t allocate enough rooms for award redemptions. Car rental revenue management executives often complain that sales are negotiating corporate and agency discounts without involving them. And at airlines, there are numerous clashes between pricing and planning departments: Pricing focuses on connecting network flows, while planning emphasizes route performance.
Travel providers need commercial strategies and models that aren’t siloed between revenue management, sales, planning, marketing, distribution, e-commerce and loyalty. Travelers generate a huge amount of data that sits isolated in various places. Data silos need to be broken down, creating a common data lake for all functions. Consequently, decision-making will be based on verifiable data and statistical methods, rather than on assumptions and guesswork. Integrated data creates the most effective combination of levers in solving commercial problems, capitalizing on data-driven customer insights, and maximizing profits.
Imagine a fully integrated commercial division working like a well-oiled machine. There is no doubt that maximum performance will be achieved, since all functions are working towards improving profit using common KPIs. Driving change, however, requires commitment and a thoughtful approach to break down and combine silos. To create a more holistic environment where all of the commercial functions can shape each other, you must:
- Have a clear focus on achieving quantifiable financial returns.
- Manage data resources and establish processes to ensure data integrity.
- Develop a change management strategy to enable success for employees, processes and tools.
- Continuously align incremental improvements while monitoring results and making adjustments.
Creating an integrated commercial division won’t be easy. The transformation plan should include small, impactful phases to maximize margin and organizational efficiency, ideas for innovative integration, and well-defined processes to increase both capability and performance levels and improve travelers' booking transparency.