8 designation of a customer suited for special treatment could also be due to

8 designation of a customer suited for special

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designation of a customer suited for special treatment could also be due to employees singling them out because they are big tippers, or personal friends, rather than truly being revenue producers for the company. Traditionally, casinos only tracked the truly big spenders, the "whales." Harrah's created the idea of tracking even the small fry. Other casinos have similar customer loyalty programs. An innovative aspect of Harrah’s Total Rewards program is that they actually use the data in a formal sense to inform their revenue management system. Revenue Management System While day-to-day booking decisions are made by hotel staff, the back-office aspects of the revenue management system at Cherokee are managed by Rainmaker. Rainmaker manages revenue management systems for many gaming industry properties. The system was initially developed by Manugistics (formerly known as Talus, and before that, DFI-Aeronomics). Manugistics has developed revenue management solutions for National Car Rental (Geraghty and Johnson 1997), Hertz (Grimes and Carroll 1995), Ford, Hilton, Marriott, TUI, Omni Hotels, Continental Airlines, Sommerfield, and Limited Brands among other firms. As is typical in revenue management situations for hotels, the system does not handle all rooms or customers. Casino hosts directly book the extremely high value, VIP customers. The revenue management system forecasts demand for 547 of the 576 rooms in the hotel. Casino hosts schedule all suites and use a more detailed form of analysis to determine the right guest for the right suite. 9
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The system forecasts demand for guests by booking date, arrival date, length of stay, room type, and customer segment. These forecasts are then fed into overbooking and optimization models which recommend inventory controls. The optimization model is a special case of the price-inventory management model presented in Kuyumcu and Popescu (2006) and produces optimal bid prices and the amount of demand to accept from each customer segment. Customer Segmentation The Total Rewards program assigns a specific value to each customer. There is no need to group customers into segments like “business,” “leisure” or other designations for the purpose of pricing – the customers self-price by gambling, and they are giving away the rooms for free. However, for the sake of visually seeing the data and ease of forecasting, it is useful to segment customers into discrete groups. Exhibit 1 shows the customer segmentation scheme. Ten customer segments are delineated based on expected gaming losses or historical “coin-in” – the amount of money wagered. The number of guests from each segment staying at the hotel on an average night is also depicted. This visual display creates an environment easier to manage. Mathematically, it might be optimal to close out rooms to customers whose expected profit is under $379.25, and hold open extra 10 rooms for customers whose expected profit is between $627.39 and $745.67. However, managerially, it is more effective to visualize the data in customer segment format.
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