Industry Overview

In Korea, the meeting space rental industy near Colleges and office districts has been growing fast. Students want to gather and study together while office workers want to develop themselves through seminars and lectures after works. However, there weren’t enough informal meeting spaces near universities and office areas. Unlike US, in Korea 3-4 colleges are clustered near one subway station, and office buildings are located near subway stations as well. Due to the geographical factor, there has been growing demands for meeting spaces. Some cafes in Korea have meeting space in separate rooms, but it can only accommodate one or two group. The biggest success factor of meeting space rental business is in private space for various party sizes.

I chose a successful meeting space rental company named ‘TOZ’ (http://www.toz.co.kr/index.asp)which has been in this industry for about ten years. In 2010, 3 million people used TOZ and the number of users is growing by 30%. I tried to find any article or webpage in English, but unfortunately, I couldn’t find any one. The following video clip will give you a glance of how the business model works even though it has a lot of Korean subtitles.

http://www.youtube.com/watch?v=8330CSX6gLs

The company defines ‘space’ by rentable rooms and ‘time’ by hours. If a room type is small to mid size, the rental fees are charged by person hour. If a room falls into a large category, the rental fees are fixed for two hours. But basically, the fixed fees are deriving from the occupancy.

Space

Division of Space

The meeting space is divided by the number of people the room can accommodate. The smallest room can only accommdate one person whereas the largest one can accommodate up to 60 people. The size of rooms are not explicitly shown, so the space is implicitly defined. However, since the number of people each room can accommodate heavily depends on the size of the room, the configuration of space should be planned ahead in the development period. Considering the redesign of floor plan is costly, the initial assessment of demand will hugely impact the utilization of space.

Single occupancy room

A room for eight

A room for sixty

Ancillary revenues

TOZ rent out laptops and projectors to meeting organizers. They charge $1.5/hr for a laptop and $2.5/hr for a projector. Customers can have free drinks for sodas and teas, but they have to pay for snacks and fruit juices. TOZ also charges for Copy machine and Fax machine. TOZ created a online community for people who want to share information about certain topics such as arts, books, computers, games, and cookings. When there is a enough demand to have a offline meetings, they organize meetings making them rent their meeting rooms. With organizing offline meeting from online demands, TOZ has been able to generate more revenue.

Different ways to split up

Since the current design of rooms can hold up to a certain capacity, it is really difficult to maximize the occupancy per SQFT. The following picture is the example of a floorplan:

Floorplan

Sometimes TOZ maximizes the utilization of space with table mix. Some rooms are designed like a interview room.

Interview room

And some rooms are designed for students who want to study alone.

self-study room

More flexible configuration – If TOZ can use sound-proof sliding wall and move walls between rooms to accommodate as many as they can at a certain time, they can generate more revenue. For example, TOZ could have more larger rooms in the morning for office workers, and have more smaller rooms after dinner for group study rooms.

Sound proof wall

Time

TOZ has explicit pricing for the hourly rate. Basically TOZ is charging flat rate for hour or 30 minutes. For example, on a weekday, the price for each person is $5 for the first two hours, and $1.25 for extra 30 minutes. Basically, TOZ charges flat rate of $1.25 per 30 minutes per person for weekdays and $1 per 30 minutes per person for weekends and students.

There should be more sophisticated pricing structure depending on arrival. Since the reservation works in ‘First come, fist served’ way, there is not much room for Revenue Management. But if the company charges different rates for different time of the day, they can capture more surplus from people with high willingness to pay. For example, if 7-9pm is the most crowded time of the day, TOZ should charge more for the period to generate more revenues as well as move price sensitive customers to less crowded time.

Price

There are two kinds of pricing structures: variable pricing and fixed pricing. In small room categories, TOZ charges $1 to $1.25 per 30 minutes per person whereas in the large room categoreis, it charges fixed rate per 2hrs per room. However, per person rate for large room categories($2.083/hr) is almost the same as the one with small room category if the room is fully occupied.

The company provides rate simulator to help meeting organizers estimate their budget. If a meeting organizer input date, time, number of people, and needs for device rental, and student ID, the total fees and per person rate will be automatically calculated. Following picture is the rate simulator:

Rate simulator

The followings are the types of rate fences:

(Physical rate fences)

• Student discounts rate(20%)
• Minimum number of people for large room categories

(Non-physical rate fences)

• Membership points
• Complimentary snacks for 9+ hours usage

Movie Theater Industry

The cinema or movie theater industry has been in existence for more than 100 years, but has become an increasingly popular entertainment venue with the rise of the film industry and advances in film technology. The original theater complexes were designed with one theater and could seat from 50 to 100 people. Seats were standard and prices did not vary according to time or space.

Today multi-theater Cineplex’s offer a variety of movie options catering to different tastes. Theaters can often be smaller, from 50 to 100 people, or larger, seating a few hundred people at one time.Space is defined implicitly in the industry. A ticket buys the right to one seat in one theater, which is a predefined amount of space.

Use of Space

The standard special layout is stadium seating, which offers the maximum capacity in the space often allotted.

Other seating styles that have been utilized are lounge style seating, such as the Parkway Theater in Oakland, California, pictured below. Unfortunately, it seems Parkway Theater has recently closed, which suggests this type of venue may not be as popular or successful as others.

A third seating or special arrangement is VIP seating for higher paying customers. Only a few companies seem to use this concept, mostly notably Vue Cinema in Europe.

A fourth concept is to offer dinner as part of the movie going experience. Turning some seats to dinner tables would be a unique use of space. It would play particularly well with the “dinner and a movie” concept in the US. Some examples of this are http://www.starcinemagrill.net/ or http://www.foreigncinema.com/

Additional Revenue Generators

Most movie theaters today offer a wide variety of ancillary revenue generators, generally in the form of food and drinks in the foyer or lobby before entering the theater. Movie theaters in some parts of Europe, such as the UK, offer alcohol in the theaters. Some theaters will also offer arcade style video games in the lobby as well. For those movie theaters that cater to the dinner crowd food is also a major source of revenue.

Apparently film distributors drive very hard bargains in exchange for the rights to play a film. In many cases, these ancillary revenue generators become the only source of revenue or profit for the theater itself as all revenue from tickets goes to the distributor or producer.

Additional uses of Space

Another concept, the only example of which I could find is http://www.12apostleshotel.com/dining/dining/dinner-movie, would be to use private rooms similar to Asian Karaoke. This boutique hotel in Cape Town has a small private theater for rent, but it is not the core of their business. The movie theater industry in Eastern Europe and Russia apparently have a number of much smaller, private, theaters, but they stand independent of larger theaters. Bringing this concept to the multiplex may be an interesting alternative to the larger public theaters.

Service could also be added as an additional component of the theater experience. While theaters already service food and drink, and some are even offering dinner to their guests, charging for delivery of these items for guests who don’t want to miss part of the movie is a very good opportunity. Otherwise moving the bar or counter selling these items into the theater so they can draw additional customers is another opportunity.

Time

Time in theaters is sold implicitly. One ticket grants access to one movie. However, there have been a number of variations to this.

Examples of variations in the current implicit use of time are:

• Movies sold as double-headers, two movies for one ticket
• Tickets sold to all day running movies, where one ticket buys access to a theater and the movie runs back to back all day
• Some theaters will also sell an all day pass, for multiple movies in one day, or a monthly pass for unlimited viewing in a month

These last examples of selling an all day or all month passes to a theater begin to cross the line to selling time explicitly. Movies are also a set amount of time and patrons are often not allowed to stay after the movie has ended. Thus unlike other implicitly sold events, such as a restaurant or golf, the duration of this event is not controlled by the customer, but rather by the theater.

In fact considering that most of the revenue of many theaters comes from ancillary revenue centers, such as food and beverage, it would make sense for theaters to allow their patrons to stay for multiple movies, thus encouraging the purchase of these items.

Some theaters do sell their space for private events, which also entails the explicit use of time. One example of this is http://conferencing.myvue.com/PageProducer.aspx. With built in stadium seating and audio/visual capabilities, theaters make for a great auditorium for private events and allow theaters to charge by the hour as hotels do for their function space.

Additional Uses of Time

Given the ample space many movie theaters have and the fact that it is not used much early in the day or at all late at night, these would be ideal times to use the space for something else. One interesting concept, which took hold shortly in Hawaii was to use a large theater space as a night club or concert venue. The theater was designed with a few alternative uses in mind and the stage in front of the screen made it well suited for a concert or dance floor. (http://www.l4waikiki.com/)

Price Lever

Physical and non-physical rate fences seem to vary widely by region. The US has the simplest approach with vary few variations in price, which Wikipedia comments on the issue as an “economic puzzle.” The standard breakdown in non-physical rate barriers generally being different prices for adult, child, senior, military, students, or other classifications of this kind. Theaters will also charge higher prices for prime time showings, generally at night, at for weekend showings. Variations of this strategy are to offer extreme discounts during very low demand periods, such as weekday mornings.

Other non-physical rate fences include using loyalty or frequent customer programs. These allow customers to pay a set amount per month for discounts on movies they watch or to accumulate points for each movie watched to be cashed in later for a free movie.

Non-physical fences also exist in the form of new distribution systems. Tickers were traditionally only offered at the ticket counter, but now they are available online or over the phone. www.fandango.com is a great example of a prebooking website. Unlike hotels where customers pay less for booking in advance, customers using these sites are paying extra for the convenience of not having to go to the ticket counter to buy a ticket in advance.

Physical rate fences are surprisingly uncommon in the US. Usually tickets are for open seating and there is no difference in price for any of the seats. Asia and Europe are very different in this case. Asia in particular will charge more for seats in the back or less for seats in the front. They often also have more and less comfortable seats which allow for further variation in price. Theaters also allow or sometimes require customers to reserve a specific seat.

Possible Additional Rate Fences

One rate fence which is not currently employed in some areas, particularly the US, is to charge more for newer or higher demand movies. Movies which are expected to be in higher demand, could be priced at a premium, but often are not.

Second class theaters, those that show movies that have been out for some time, have closed across the US with the ease of viewing movies at home. However this idea could be brought back to the mainstream by showing older very popular movies on occasion at larger theaters. Movies such as the titanic or avatar, which did well in their initial showing, would likely draw large crowds if shown again a few years after they came out.

The company researched for this blog is known as Uninor. It is a joint venture between Norwegian telecommunications company Telenor and an Indian Real Estate company Unitech. The company was the first in the world to introduce a Dynamic Pricing to mobile call charges. Based traffic experienced by a wireless tower servicing any area a customer can receive discounts ranging from 5% to 60%. This particular service has been very well received in the market with Uninor commanding as many as 106 million subscribers . In 2011 alone Uninor added as many as 2.03 million subscribers. Off the total number of users Uninor currently has 40% of the subscribers under the ‘Dynamic Pricing’ Plan. Now let’s take a look the general parameters that make such an innovative application of revenue management technique possible in the telecommunications industry.

The mobile telephone industry is one of the leading industries around the globe. Telecommunication, as an industry that is set to drive growth rates of beating the national GDP growth average. One of the fastest growing markets with intense competition to go along with that is the Indian market. According to the statistics India is the second largest mobile phone market with 903 million users . The industry has shown growth rates of 7-10% over the last decade. Over the last several years many international companies entered the market leading to intense price wars which resulted in some of the lowest call rates in the world .

The reducing margins (from 0.25% to 0.08% per call) made the telecommunication industry focus solely on driving volume business. With the advent of more sophisticated competition that charged for call on per second basis rather than the traditional per minute basis.

The industry shows the characteristic of fixed yet perishable inventory of wireless bandwidth that make it conducive for revenue management practices. The size of the bandwidth determines how many users the company can enroll. Every additional subscriber beyond the allotted bandwidth requires additional bandwidth (space) on the wireless network. The time that the cellular service providers generally sell is considered in sections of 60 seconds. Although the time, as seen in India, can be defined in as small a section as 1 second.

The Industry does not define space implicitly. Although it does not advertise that every subscriber occupies a specific amount of bandwidth of its total capacity. However, the cellular service provider does have a maximum carrying capacity of its subscribers. There is only one standard bandwidth that each customer occupies thus there is little need or scope to define space differently. None the less there is scope to define the time lever is different ways. For example, some organizations may define it as per second while others may choose to define it per minute. The traditional landline service providers sometimes define time in 3 minute slots. This division of time is what is conveyed to the customers thus can conclude that the time component of the service is explicitly defined.

I was unable to get any information on the different rate fences actually applied by the company. But here are some of the probable rate/physical fences the company could apply.

1) Geographical – Based on the Regions that show the slowest growth. Could be a City or a Province.
2) Contract Plan Fences- Based on the initial value of the contract being purchased.
3) 2G Vs. 3G Services- Based on the data packages bought by the customers.

Industry Overview

New Asia Bar @ Swissotel The Stamford       

A sophisticated club, 71 floors above the city skyline, Swissotel is strategically located in the heart of Singapore’s business and shopping district, and above the City Hall MRT.  Swissotel is also the highest luxury hotel in Singapore.

The bar holds special events on the second Saturday of every month and on the last Thursday of every month, where international DJs take center stage.

“Party revelers impress with their sleek dance moves whilst dancing the night away at New Asia to Resident DJ Chris Smith’s beats. Sensuous cocktails, sexy pulsating tunes against the panoramic backdrop of Singapore’s scintillating cityscape are complemented by chic parties”  —  Swissotel, The Stamford

Operating Hours

Sunday – Tuesday: 3.00pm – 1.00am

Wednesday and Thursday: 3.00pm – 2.00am

Last Thursday of the month: 3.00pm to 4.00am

Friday, Saturday and eve of Public Holiday: 3.00pm – 3.00am

Happy Hour

Monday – Sunday: 3.00pm – 9.00pm

Latest Promotion

http://www.newasiabar.com.sg/outlet/promotion/

Official Website

http://www.swissotel.com/EN/Destinations/Singapore/Swissotel+The+Stamford/HOTEL+HOME/Gallery/Dining/New+Asia+Bar.htm

How Lounge bars normally define and price their space and time:

• Lounge bars have significant slow periods and peak periods, typically peak periods encompassing the evening hours
• Menu prices are fixed
• Separate space for table section, bar section, dance floor section and VIP section
• Separate peak time, non-peak time, special events -http://www.newasiabar.com.sg/outlet/promotion/

Space

1. Lounge Bar architects typically define space implicitly when first designing the bar.  Lounge bar can control the way of space is sold.

2. In New Asia Bar, the bar is divided into two floors:

• First floor includes bar, open table, private table and dance floor – The tables include 2-tops, 4-tops, and bigger tables accompanying the sofa seating.
• Second floor is the VIP area, which does not have a bar.  However, the second floor is made up of private seating and has views of the entire dance floor as well as sweeping floors of the Singapore skyline.
• The bar section has limited seating
• Dance floor
• New Asia Bar separates those seats that are directly in front of the floor-to-ceiling windows from the others

3. New Asia Bar uses space to generate additional revenue by:

• Charging an additional fee for those seats that have a direct view
• Separating the VIP seating from the other with a premium charge
• Renting out the entire bar for private events
• Charging a cover fee to enter New Asia Bar

4. Creative things that New Asia Bar could do to split up its space differently:

• Split up space for observation section for day-time providing high tea to generate more revenue.  The observation section provides professional pictures taken.

Times

1. The lounge bar normally sells time implicitly. The bar normally does not charge customers by how long they stay- guests’  duration is unpredictable.

2. Four different ways in which companies sell time explicitly:

• Sell drinks
• Sell food
• Sell view
• Environment/Atmosphere (Entrance/Cover Fee)

3. Creative things that New Asia Bar could do to split up their time differently:

• Make happy hour from 5:30pm – 9:00 pm
• Have High Tea from 2:30 pm to 5:30 pm

Price

1. Physical rate fences (tangible):

• View Seating

-$100 ++ minimum spending per head on special events

• VIP Seating
• Regular Private Seating

-No entrance fee with table booking

• Entrance Fee

-Only applicable after 8pm
-$25 per person on normal night
-$30 per person on special events

2. Non-Physical Rate fences (intangible):

• Happy Hour- Discount specific drinks to shift demand to slower period.
• Special events every month- Cover charge after 8:00 pm    
• Email list- Special offers and promotions

3. Creative rate fences that New Asia Bar could use to generate additional revenue:

• Membership- Pay a one-time membership fee and be allowed to re-enter the bar multiple times and could be allowed to bring along one to two guests.
• Advanced reservation- receive benefits from booking table in advance

Background

Cyber Café, or Internet Café, is a very famous and popular entertainment industry in Asia. It is a space to provide customers using PC to access to Internet. In some countries, usually in Africa, which do not easily to access to Internet, people regard Internet Café as a place to work – they email and they search some information on line. However, Asian usually regards Internet Café as an entertainment industry, and people usually play on-line game there.

http://en.wikipedia.org/wiki/Internet_caf%C3%A9

Usually Internet Café offers customer a PC with limited space.

Internet Cafe

However, in some countries, such as Japan, Internet Café provides service other than just using PC and simple drinks. Sometime, Internet Café in Japan provides personal space to use PC. Customer could order or have free food and beverages without leaving the store, read various magazines and manga (comic books), and take a shower in the store. Some people even pay this kind of private space as their temporary refuge if they do not have money to rent a room or studio.

You can watch this video from Youtube, which shows you how amazing a Japanese Internet Cafe is.

http://www.youtube.com/watch?v=ScOfA_y_Hmc

Companies in this industry would sell their space as facility (PC) or sometimes as a booth, a room with a PC, and charge customers in a fixed price per few hours, or by different time of day as well as weekday vs. weekend. Therefore, the way they charge customer may vary and be complicated.

Space

Internet Café usually sell the space implicitly.

Companies would split the space into different category – an open space, semi-private space, or a private room. However, companies would only have one category in each store. Since Internet Café define the space by company rather than by customers, company sells the space implicitly.

Open Space

Semi-Open Space

Private Booth

Except selling the space regularly, some big Internet Café with all open space rents whole space for a gaming event, or company might rent its PCs for few days.

Event

Since most of Internet Café is a part of entertainment industry, the environment usually is kind of noisy. I have been to Internet Café in Korean because I have to check my email; however, it was really irritating since people smoke and the sound of game were very loud. I believe that there must be a demand that people who need to go to Internet Café rather than just for fun and they need some place quite. Therefore, Internet Café may split the space as quiet zone or non-smoking zone. In this case, the company may use two different areas flexible – when there is no demand for quiet zone, company in Asia could sell this area as a regular area. For those companies out of Asia may create a gaming zone.

Time

Most of time, Internet Café sell time explicitly.

At beginning, companies in this industry usually sell the space based on serving hours. For example, USD$6.4 for the first half hour and USD$3.2 per 15 minutes thereafter.  In this case, Internet Café is in quadrant 3, fixed price and un-predictable time, since company would not know how long time that the customer would use its facility.

Therefore, most of Internet Café in Asia began to develop prepaid system. Customer could prepay for 1 hour, 3 hours, 4 hours, 8hours, and even 12 hours with certain discount price. Though customers could always change their ideas to extend the time (usually not shorten), at least the duration is comparatively predictable. Some Internet Café would charge you by time of day (as the video above to introduce Japanese Internet Café), or by weekday or weekend. I would say that Internet Café is trying to move from quadrant 3 to quadrant 1 (re-define the duration and control the time), and even slightly to close to quadrant 2 (dynamic pricing).

Charge by time

Of course, according to what I wrote on the space section, Internet Café would sell time implicitly when there is an event. It is kind of pity that I could not find that how much Internet Café would charge for an event.

Event

Price

In this industry, there are few rate fences, no matter in physical or non-physical. Although there are different categories of space, company tends to have one category of space at one time. Internet Café would not limit the duration of computer usage because company prefers that customer stays in Internet Café as long as possible.

However, there are two rate fences which are non-physical.

• Membership. Usually membership could have a free drink or more discount.
• Minimum F&B consumption. For those extremely cheap Internet Cafes, they do not offer free drinks. Instead, those companies request for minimum F&B consumption.

Most of Asian Internet Café are not expensive; therefore, companies would provide various food and beverage and encourage customers to order it. Sometimes, food and beverage functions as major revenue generator for Internet Café. That is why Internet Café in Asia usually is without time limitation and tries to keep customer to stay in store longer.

In some popular time slot, such as evening, companies may limit the time of usage to increase revenue since the shorter the duration, the more Internet Café earn regarding computer usage. Meanwhile, during meal time, Internet Café may increase the minimum F&B consumption.

1. Industry Overview:

In France, one of the most popular transport modes is train.  SNCF is France’s national railway, providing high speed, overnight and local services in France and beyond into Spain, Switzerland and Italy.

>> http://www.tgv-europe.com/en

Types of Train in France:

Railway industry is quite similar to airline industry, as it sells seats for a transport from an origin to a destination. The price depends on journey, class, and date of booking. Thus, railway industry can be placed in Quadrant 2, where its service has variable prices for a predictable duration. This industry also has the appropriate characteristics to apply revenue management strategies. Those characteristics are:

– Inflexible capacity: the number of seats on a train is fixed

– Variable and uncertain demand: the demand is different depending on the time of day, day of week, origin-destination pairs, and purpose of travel

– Perishable inventory: the unoccupied seat cannot be inventoried, and the revenue of that seat is missed

– Low marginal cost and high production cost

– Product can be sold in advance

– Heterogeneous customers with different segments, varying by age, purpose of travel, independent or group, etc.

However, there are some differences that make the revenue management of railway industry is little bit different than that of airline industry.

– More difficult to forecast demand and to have the accurate number of travelers on a service: no check-in procedure, open tickets (rail pass) generally allow passengers to travel on any rail service, walk up tickets are very common (a large number of passengers purchase their tickets on the day from the station)

– Less difficult to deal with overbooking: passengers are often allowed to stand during train journeys hence increasing capacity beyond the number of seats

———

 2. Space

Railway industry defines space implicitly.

Normally, a train has two classes: Economy (2^nd Class) and Comfort (1^st Class). The seating options and services are different for each class. The price is same for different seating options in a class.

 Economy Class:

 Comfort Class:

Trains, especially TGV has “TGV bar”, which provides a wide selection of meals and sweet snacks available for purchase. Additionally, the TGV bar offers films on DVD, magazines, games for children, Paris Metro tickets, even USB sticks for purchase. There is also a rolling snack cart that comes to the customers’ seats.

For additional revenue, TGV offers Premium service includes 1^st Class seat, meal service, and access to the TGV lounge at the train stations.

Personally, I would charge difference fares for different seating options in each class. A group will want to pay more to have a Club 4 seat. A couple will want the Duo seat or Club 2 seat. And an individual traveler will want a solo seat. As the number of seat are fixed, we can charge for each option, rather than a “first comes first served” policy.

I’m also thinking about a mini-cinema on train, especially overnight train. Normally, the overnight train have load factor less than 80%, so the train can use one car to transform into a mini-cinema with a projector and a screen. When the train is busy, the car will be transformed in normal guest car again.

——

3. Time

Railway industry defines time implicitly.

Although the duration of a journey is determined, the railway industry sells a journey rather than specifically selling time. In addition, there may be issues that cause the increase/decrease in duration of the journey.

However, the railway industry also tries to sell time explicitly with the Rail pass. With Rail pass, customers can have unlimited travel on the national rail network of France for a fixed number of days. The choices are 3, 4, 5, 6, 7, 8 or 9-day pass within a one-month period. Travel days may be used consecutively or non-consecutively.  Thus, the fare becomes rate-per-day, not anymore rate-per-trip.

>> http://www.raileurope.com/rail-tickets-passes/france-pass/index.html

The industry can sell time explicitly by providing Rail pass with weekly or monthly unit. However, I think it will not be effective as it makes the demand forecasting much more complicated.  Half-day unit won’t make sense as a trip is normally more than 3 hours.

——–

4. Price

Tickets can be purchased 60 to 120 days in advance depending on the route.

Ticket discounts are based on advance purchase, availability, and certain restrictions. Everyone is eligible to receive discounted fares by purchasing an Economy or Comfort class ticket in advance. Youth and seniors can enjoy specific discounts as well. Discounted tickets are available for youth (under 26 of age), seniors (age 60 and over) and children (generally ages 4-11) but should be verified with each product.

Price at 1 week before departure

Price at 2 weeks before departure

Price at 3 weeks before departure

Price at 4 weeks before departure

Normally, prices are reduced for 1or 2 week-advanced purchase, slightly reduced for 3-week-advanced purchased, and stay same for more-than-4-week-advanced purchase.

The physical rate fences are the classes:

The non-physical rate fences are age, season ticket, and loyalty

As the rate fences are now already too sophisticated, I would rather consolidate these fences than create new fences to confuse customers.

(-Thao Ly)

——–

References:

http://www.raileurope.com

http://www.tgv-europe.com

http://www.sncf.co.uk/

Amstrong and Messneir, 2010. Railway revenue management: Overview and Methods

Schroeder, Braun, and Schnieder. Revenue management in the railway industry

London’s West End Musicals needs no introduction. Similar to the Broadway in New-York, London’s west-end is one of the cities best attractions.

http://en.wikipedia.org/wiki/West_End_theatre

The below website shows the musicals currently playing:

http://www.londontheatre.co.uk/londontheatre/whatson/musicals.htm

I am using one theatre and my favorite musical as an example: Queens Theatre- Les Misérables.

http://www.queenstheatrelondon.info/

Space for theatres is implicit where a theatre is broken down into a seating plan based on the distance (visibility) to the stage. In the case of the Queen’s theatre, space is initially broken down into three sections based on proximity to the stage: Stalls, Dress-Circle, and Upper-Circle. The sections are further broken down into rows and seat numbers.

So other than the actual show, the theatre also sells Programs detailing the show, memorabilia, alcoholic and non-alcoholic beverages that are served at various bars in the theatre and food served at the bars and by ushers inside the theatre.

http://www.lesmis.com/shop/

Musicals sell time implicitly based on a set time for a performance.

Traditionally all musicals in London are shown six days a week Monday to Saturday from 7.30pm. Two Matinee shows are also shown on Wednesdays and Saturdays from 2.30pm.

Theatres use physical rate fences by pricing their seats based on location and visibility with respect to the stage. So prices are differentiated for Stalls, Dress-Circle and Upper-Circle. Prices are also further broken down for visibility, charging lower fares for restricted visibility and standing.

Non-physical rate fences include non-refundable tickets, different pricing for matinee and evening shows and pricing based on lead time to booking.

Other rate fences could include seasonality, day of the week, booking channel, demographics, and bulk bookings. Packaging of food and beverages into ticket pricing and of course mixing hotel, theatre and travel prices together.

Background

The skating rink at the Marina Bay Sand’s Integrated Resort in Singapore is located inside the retail complex on the Canal Level, next to the Rasapura Masters Food Court.  Operating hours are 10am to 10pm daily (closed 5pm-6pm for maintenance). http://www.marinabaysands.com/Singapore-Shopping/Skating-Rink/

The Marina Bay Sands Integrated Resort

It is pretty small, measuring only about 600 SM. The rink shape isn’t your typical elongated oval (an Olympic hockey rink comes in at about 1830 SM.  Given its small size it is mainly used just for recreational skating.  It is a good way to keep the kids happy since the rest of the integrated resort is geared for adults (lots of gaming, nightlife options, upscale shopping, celebrity chef restaurants, etc). 

While I’m focusing only on the rink at MBS, in case you’re curious and want to go ice skating in hot and humid Singapore, the MBS rink is one of only two operating ice skating rinks.  It came online with the opening of the integrated resort in 2010.  The only other rink is Kallang Ice World which opened in 2007 as part of the Kallang Leisure Park, located near the Stadium MRT.  At 975.5 SM, the Kallang rink is much bigger but still nowhere near Olympic size.  Nevertheless as Singapore’s larger rink, Kallang is the preferred practice rink for figure skaters and hockey players. Some more trivia that is sure to improve your life…the NTU figure skating club uses Kallang’s rink.  A third rink, Fuji Ice Palace, ceased operations in 2008.

Me at the MBS rink

Defining Space

Space in an ice skating rink is sold implicitly but not as implicitly as a hotel where space is split up into guest rooms or restaurants where space is divided into different types of seats.  The customer doesn’t know that they are being sold a piece of space which in this case would be the amount of space they are allocated based on the maximum safe capacity that the rink can handle.  

Defining Time

At the MBS rink, time is sold explicitly in hour-long blocks.    The pricing is as follows: S$7 for the first hour for adults (S$5 for additional hours), and S$6 for kids for the first hour (S$3 for additional hours).  This makes it easy to predict duration. 

Most other rinks in the industry (the kind that I’m more used to seeing) sell time in a more implicit manner using a flat rate that allows the skater to skate all day.  This sort of pricing scheme makes it hard to predict duration.

If MBS sticks with an explicit definition of time, it could consider splitting time up into the half hour, perhaps offering a 0.5 hour “quickie” or a 1.5 hour option.  The rink is small so I think most people will get bored pretty quickly and decide to leave before a full hour is up.  Thus a quickie may be an enticing offer.  They can do a few laps, take the necessary “victory” sign picture and move on with their day. 

For a rink that chooses to define time implicitly, another way is to split it into perhaps morning (10:00-noon), afternoon (noon-17:00), and evening sessions (17:00-closing). 

A night photo that I found online

Rate Fences

Rate fencing is not really utilized at the MBS skating rink except to divide the adult rate classes and child rate classes (a non-physical rate fence).  Age is used to prevent jumping to the lower rate class, though the cutoff age is not clear from the website.

Presently there doesn’t seem to be any real physical rate fence used.  There are no amenities (though I guess MBS can bundle in some equipment if they were to be more creative with managing the ice rink).  There are no “fancy ice skates” that can be rented at a premium over the regular ugly ones, and that can be used to differentiate a premium customer from a regular one.

Also since it is a small ice rink and people move around, there really isn’t a sweet spot that would allow you to sell a particular piece of it at a premium as you might be able to do for better seats in a movie theater or a nicer table in a restaurant.

The rink can consider rate fences to aid in RM efforts but it should probably approach it in a more back of the scenes approach (as in keep the pricing board at the ticketing counter as simple as possible).  The last thing you want to do is confuse the customer when they stare at the prices.  Here’s some ideas for rate fences.

• If MBS begins to do reservations (i.e. for peak periods), a credit card guarantee against arrival uncertainty could be used to justify a discount for booking ahead.   
• If MBS were to consider launching targeted promotions, adding in value adding amenities (i.e. souvenirs, equipment bundling, or some sort of special service like helping to clear the ice for a few minutes so a man can propose to his girlfriend) could be a physical rate fence. 
• With discount promotions, restrictions on usage become a non-physical rate fence. 
• If MBS were to introduce discounted pricing onto their pricing board based on time of day, day of week, weekday/weekend & public holiday, then these factors become non-physical fences
• If MBS were to do group sales (more on that later), then the group affiliation becomes the non-physical fence.

Factors appropriate for Revenue Management

Fixed Capacity: The MBS rink has a fixed capacity.   It’s not going to get any bigger. There’s probably also a maximum limit of people who can be on the ice at any one time for safety reasons.

Perishable Inventory:  This is valuable real estate inside a busy retail complex.  If the space isn’t being utilized as efficiently as possible (i.e. not a lot of skaters) throughout the operating timeframe each day then there are lost revenue generating opportunities.

Appropriate Cost Structure: high fixed cost (to build it) and relatively low variable cost to run it (probably just some staff to sell tickets, handle the shoe rental, someone to watch for safety, and someone to drive the zamboni)

Varying Customer Price Sensitivity: maybe…Ice skating at MBS is pretty expensive.  I’m used to paying a flat rate back in the States which is something like $10 all day.  At MBS there is a fixed pricing scheme of S$7 for the first hour for adults (S$5 for additional hours), and S$6 for kids for the first hour (S$3 for additional hours).  While I’m sure there are tons of rich, price insensitive people who come to MBS, there are probably lots of poor people like me who just visit from time to time to walk around.  I might be more inclined to want to skate (on an impulsive whim) if they offer a variable pricing scheme with promotions for off-peak periods.

Predictable Demand and Time Variable Demand: MBS probably has the data to forecast customer arrival patterns by time of year, DOW, and TOD.  I don’t think they do reservations so you’re not going to really have an exact on-the-books kind of demand picture at the start of the day, but there might be a correlation of ice rink customer volume with occupancy patterns, particularly if drilled down to certain customer segments in house?

What Quadrant?

Currently the MBS ice rink is likely at quadrant 1.  It has a predictable duration (customer is charged based on how many hours they want to skate), and a fixed price (though they get a little discount after the first hour).  The rink would have to move towards a more dynamic pricing scheme in order to advance towards quadrant 2.

Measurement

Similar to a restaurant where customers start and end their meals at different times, the MBS ice rink has people starting and ending their time blocks at different times.  Additionally there is a limit to how many people who can safely be on the ice at one time. Although I’m not sure what the best way to measure success is, I’ve got two ideas.

One way is to use revenue per available square meter (RevPASM) since you know the rink dimension.  You can look at RevPASM hour by hour (to be more accurate you can look into prorating the revenue from each customer based on when they start and finish arriving at a total hourly revenue figure for the rink) and try to maximize it without overcrowding the rink. 

Another idea that I’m more inclined to attempt is that I’d take into account the maximum safe capacity of the rink based on company policy (or regulation?) and do an imaginary compartmentalization of space so that it can be sold more implicitly.  This would be analogous to dividing up a restaurant dining room into seats.  Instead of restaurant seats, you’d have skater-space (the amount of space you’d allocate for the skater on the rink).  So if I say 10 SM per skater, then I can safely put 60 skaters on the 600 SM rink.  Doing so, I can use a measurement similar to revenue per available seat hour (RevPASH) that incorporates both a space and time element: revenue per available skater-space hour, which abbreviates to RevPASSH (threw in the extra “S” to avoid confusion)

Ancillary Revenue

 Skate rental $3 (you’re forced to rent; cannot bring your own skates), socks $6 (probably b/c a lot of people probably make a last minute decision to skate and don’t have crew socks high enough to protect your ankles from chafing), gloves $10 (maybe if you fall a lot).  People who skate probably also spend some money on food (hot chocolate?) at the adjacent food court.  Additionally, they (especially the parents) probably are going to spend money in other parts of the integrated resort as well.

How to Boost Revenue Performance

For the MBS ice rink, probably the easiest way to boost revenue performance and get closer to Quadrant 2 is to examine RevPASSH and figure out the hot/cold periods throughout the day.  Then attempt to implement variable pricing to maximize revenue.  They can launch promotions and discounts to drive demand on the cold periods (i.e. through targeting their Premium Advantage member card holders).  Actually if they’re more concerned with a total RM approach, I want to put it out there that I’m a Premium Advantage card holder and I’m a sucker for free things.  So if they gave me a free skate hour I’d probably use it, and end up staying and blowing money in the casino after.  This suggests that if you can do something to get kids to beg their parents to take them to the rink, MBS stands a good chance of getting one parent to venture into the casino while the other watches the kids.     

MBS can make more money by selling ice rink souvenirs and enticing people to eat at the food court next to the rink.  You can have your hot chocolate.  And, since it’s Asia, there’s dim sum!

mmm.....dim sum!

Another thing MBS can do is to consider selling to small groups as part of their meeting package.  It could be marketed as a “quick fun break” where meeting goers can all go down and have a few minutes of fun.  But MBS must do this carefully and target the cold periods.  MBS is a large MICE facility.  The last thing you want is a few hundred meeting goers all demanding to use the rink at once.  The poor rink attendant will get slaughtered.

Additionally they can look into streamlining the procedures to get people off the ice quickly once their time is up and to clean and turn over the ice skates. This will help to enforce the predictable duration and also reduce time between customers.

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