AUSTIN, TX—Prices are everywhere—from the window stickers on cars inside auto dealerships and the tags families put on unwanted merchandise for garage sales, to products on endcaps at the nearest drugstore and even the next item up for bid on The Price Is Right.
For the hospitality industry—and especially large resorts—“the price is right” could mean the difference between a profitable retail location or one that guests just walk on by as they head to the pool or front lobby.
MGM Resorts International recently signed an agreement with Revionics, Inc., a provider of end-to-end merchandise optimization solutions based here, to enhance retail pricing strategies throughout its U.S. properties—including the Bellagio, MGM Grand, Mandalay Bay and Mirage in Las Vegas. The Revionics Price Optimization solution will help MGM Resorts drive and measure profitability across hundreds of its retail locations, scaling pricing processes to accommodate its retail growth and incorporate enhanced reporting, forecasting and analysis, according to Mike Isom, VP, global pricing strategy for Revionics.
“Optimization is the science of calculating the right price for a product at that specific time, based on the consumer demand signal,” he explained. “Our system takes historical sales data for each item, and models its elasticity—the response change due
to pricing change. These elasticities are then combined with a strategic
direction, consisting of rules and
science direction, to provide prices to drive toward the client’s strategic business goals.”
The solution features science-based pricing recommendations, self-tuning pricing models, real-time “what-if” scenario planning tools and the ability to rank pricing recommendations based on what will make the most impact on the business. According to Revionics, its Performance Intelligence provides a clear, graphical dashboard of the pricing strategies and state of the overall business, which frees the MGM Resorts pricing team to focus on more strategic pricing initiatives and less on manual pricing reviews.
“Our project with MGM in the hospitality segment has helped solidify the value of optimization in a very nontraditional retail environment,” said Isom. “Hospitality providers can price against not only customer stay duration details, but also combine unique events and holiday lift factors to help take advantage of forward-scenario planning to establish optimal pricing opportunities and recommendations.”
For a facility like, say, the MGM Grand—which contains a number retail outlets and has to contend with competition from nearby hotel-casinos (including some owned by MGM Resorts International), as well as venues up and down The Strip—pricing optimization can be well-served by a software-as-a-service solution.
“While the concept of pricing optimization remains foundational, it can vary based on grouping of like-minded areas of the business together. In the hospitality sector, segmenting pricing recommendations can vary by leveraging the differing shopping patterns within a property,” said Isom. “For example, taking each of the individual properties of a provider and segmenting out different purchasing locations—main floor outlets vs. pool locations vs. conference or concert locations—allows the ability to not only keep select items commonly priced, but also allows the individual pricing of key items based on their importance at that location. There may be different strategies for premium properties than a more value-based property while still achieving a client’s overall enterprise goals.”
For MGM Resorts International, which operates 23 resorts around the globe, working with an established price-optimization company like Revionics—whose solution is used in more than 40,000 retail outlets worldwide across more than 18 million products, with 2.2 billion SKU/store combinations modeled weekly, according to Isom—was the ideal choice.
“Because we cater to so many different types of customers, we need strategic and precision retail pricing that will motivate purchases among our guests,” said Steve Schnur, MGM Resorts’ director of merchandise planning and analytics. “After an in-depth search, we found that Revionics met all of our criteria—the solution provides full transparency throughout the pricing process, fast time-to-insights, and scalability.”
MGM Resorts is the first client in the hospitality industry for Revionics, which was founded in 2002 in Roseville, CA, before moving to its current headquarters here in 2013. According to Isom, retail pricing optimization “had its beginnings within the traditional fast-moving consumables market—food, mass and drug—but the basic concept of pricing optimization has since been introduced to other retail segments. Specialty retailers, fashion retailers, auto parts, building supply and e-commerce providers are just a sampling of the variety of retailers that can take advantage of this science. Virtually any retail environment can drive better business results using pricing optimization.” HB