1. Case study Revenue Management of Gondolas Sheryl Kimes

2. Gondola in Venice 20million visitors to Venice per year
Transportation → tourist attraction
The Venice experience
# of gondolas has dropped to 400 today
Cost of building one boat = 2~30,000 Euros
Regulated by the City of Venice: desire to maintain the tradition, but also need the economic impact
Balance between tradition and revenue

3. Gondola rides
Demand is extremely high: at least 3 million rides in 2004 (8,219 rides/day)
Steered by gondoliers (about 425, must be born in Venice). Available at 8 ferry stations
80 Euros per ride (40 minutes, up to 6 passengers)
100 Euros in night (7pm to 8am)
Directly with gondolier, via a hotel, via a tour operator (80%)
35~70 Euros/person when booked via tour operators
Package deals with hotel, bus, dinner or music
Not easy to board quickly → need assistant

4. What can be done to increase the capacity of gondolas
What can be done to increase the capacity of gondolas? What revenue impact would this have?
Define the daily capacity
Explain ways to increase capacity
Discuss the possibility of increasing revenues and pros/cons for each way

5. Turnover time between rides
# of gondolas
# of gondoliers
operating hours
duration of the ride
Turnover time between rides
# of people on gondola
Capacity
400
425
24 hours
40 minutes 20
minutes?? 6
On the basis of gondola, maximum daily capacity
= 400 gondolas X 24 boat rides = 9,600 rides (57,600 passengers)
On the basis of gondolier who works 8 hours, maximum daily capacity
= 141 gondolas(425gondoliers in 3shifts) X 24 boat rides = 3,400 rides (20,400 passengers)

6. Different ways to increase capacity
Increase # of gondolas
How many?
Any problems?
Increase # of gondoliers
Big revenue potential
But, entry barrier is very high
Decrease the duration of the ride
Reducing by 10’ brings 4~5 more rides per day
Reduce price? Quality?
Get more people on each gondola
Putting all 6 people in each boat (even with strangers)
Building a new gondola accommodating +6. Cost?
Reduce the amount of time between rides
Reducing by 5’ brings more rides and increase in revenue
But, how?

7. Consider the pricing structure of the gondolas
Consider the pricing structure of the gondolas. What sort of changes would you recommend? How would customers react? What revenue impact would your recommendations have?
Discuss the possibility to use revenue management strategies and differential pricing
Do you think tourists feel fair when they are asked to pay different prices?

8. 3 necessary conditions are met Differential pricing should work
Dual pricing (Italians vs. foreigners)
Lower rates for older customers
Early bird promotion
Price fairness?
Change the distributions
Heavily rely on tour operators (huge profit margin)
Have customers book directly