Hotels leave money on the table 100% of the time: if a hotel is sold-out of rooms that means it could have priced them higher, and if there are rooms still available that means it could have captured more revenue by renting them out through promotional pricing. Pricing properly is mission critical– because hotel rooms are a perishable good with a fixed cost, any profit from a price increase drops directly to the bottom line.
As if this weren’t enough of a problem waiting to be cracked, Online Travel Agencies (OTAs) and the sharing economy (i.e. AirBnb) are also putting increased pressure on the hotel industry’s profitability.
This is where Duetto comes in.
Duetto’s Value Creation
Launched in 2012, Duetto uses data and algorithms to help their clients dynamically update pricing across multiple channels and increase profitability. In this era of Big Data, Duetto uses its analytical chops to crunch variables upon variables that affect hotel pricing: demand, traffic to the hotel’s website, holidays, events in town, weather, competitive pricing relative to other hotels nearby, historic no-shows, cancellations, and whether guests want to stay one or several nights (it’s more worthwhile for a hotel to rent for several nights at a lower rate, than to automatically grant a room to a higher rate client but only fill it one night).
Duetto’s analysis then allows hotels to update real-time how they price rooms on their own sites, on partner channels (i.e. Kayak), and to price discriminate among would-be clients based on their search terms and timing. If this sounds like Uber surge pricing for hotels…that’s because it is! Ultimately hotels capture more value by pricing closer to true willingness to pay, but consumers win too if demand is low and Duetto leads to more frequent last-minute deals.
Duetto’s Value Capture
Duetto operates as a price-optimizing SaaS for business clients, and charges a yearly SaaS subscription fee based on the number of rooms in a hotel it manages, and the quality of the hotel.
Using data in the hospitality isn’t a novel idea – many hotels have de-facto outsourced price optimization to OTAs such as Kayak, or are using older companies such as Rainmaker and IDeaS, which have been around since before the advent of Big Data. Duetto’s competitive advantage lies in the ease of vertically integrating its SaaS into a hotel’s own operating system, and in the immense industry knowledge of its co-founders: Craig Weissman was a co-founder and former CTO of Salesforce, while Patrick Bosworth and Marco Benvenuti ran revenue management for the Las Vegas Wynn.
The hospitality industry as a whole is notoriously slow in adapting to change, but concrete returns on investment in Duetto’s SaaS price-optimization should make it an adoption no-brainer.
As for expansion goals Duetto has already signed up roughly 30 hotel chains, with its sights set now on the industry heavyweights such as Starwood, Hilton, and the likes…