mark w. shafer...decision science teddy benson, director decision science & integration ......

© Disney

Mark W. ShaferSenior Vice President, Revenue Management & Analytics

© Disney2

The views expressed are my own and not

necessarily those of The Walt Disney Company.

Any analytics strategies or techniques

attributed to Disney are not necessarily those

that Disney may use in a given situation.

© Disney

Who Are We

How Did We Evolve

Key Lessons Learned

3

© Disney4

© Disney5

2018 Revenue $59 Billion

Parks &Resorts

34%

ConsumerProducts & Interactive

Media8%

StudioEntertainment

17%

MediaNetworks

41%

© Disney6

To be the leader in the design, development,

and integration of innovative decision science

solutions to improve The Walt Disney Company

business performance.

© DisneyConfidential

Sales Optimization & Media ResearchPricing & RM IntegrationMarketing & Content Analytics

Advanced Modeling and Scientific Engineering

Data Modeling, Analytic Solution Development and Project Management

Karin Kricorian,

Director

Management Science

& Integration

Olivier Flament,

Director

Management Science

& Integration

Tom Denslow,

Director

Management Science

& Integration

Hai Chu, VPDecision Science

Teddy Benson, DirectorDecision Science & Integration

Mark Shafer, SVP

Revenue Management & Analytics

Dis

ne

y D

ec

isio

n S

cie

nc

e &

In

teg

ra

tio

n

7

© Disney

Statistics

Cluster & Segmentation Analysis

Data Visualization

Network Modeling & Graph Theory

Machine Learning

Decision Theory

Probability Theory

Factor Analysis

Principal Components

Simulation

Extrapolative Forecasting

Explanatory Forecasting

Bayesian Forecasting

Unconstraining Methodology

Mixed Integer Programming

Linear Programming

Non-Linear Programming

Dynamic Programming

Economics Theory

Discrete Choice Modeling

Revenue Management Science (e.g. Overbooking)

Pricing Science (e.g. Elasticity Estimates)

Data Modeling

SQL (Structured Query Language)

SAS

8

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250+ Cast Members50+ PhDs

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How Did We Evolve?

© Disney

1995

Hotels

11

© Disney

Merchandise

Food and Beverage

Sales Optimization

Theme Parks

12

Disney Cruise Line

Hotels

© Disney

Merchandise Food and Beverage

Disney Cruise Line

Sales Optimization

Theme ParksHotels

13

© Disney

7

14

© Disney

Mar 2014Front Page of

The New York Times

“Disney … has

turned this into a science.”

15

“…Disney even managed to

do it by charging half as much for top tickets as some rivals.”

© Disney16

U.S. Air Force & Walt Disney awarded the 2017 INFORMS Prize For Operations Research & Advanced Analytics

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Key Lessons Learned

19

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

Flaw of Averages

You Are Never Finished

18

© Disney19

People Express Route

© Disney20

January 17, 1985

American Airlines announces Ultimate Super Saver fares.

The “Birth” of Revenue Management

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Investment both expands the company’s revenues

as well as keeps it successful

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

Flaw of Averages

You Are Never Finished

22

© Disney

There will come a time when you will be

in a situation with the right decision,

wrong outcome.

23

© Disney

Adam SavageFormer Co-HostMYTHBUSTERS

Stephen DubnerBestselling Author of

FREAKANOMICS SERIES

26

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

Flaw of Averages

You Are Never Finished

25

© Disney29

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

Flaw of Averages

You Are Never Finished

27

© Disney

Recognize you are never right and you’re never done.

- Dr. Adam Grant, University of Pennsylvania

28

© Disney

Manual RM

Science Based

RM

Availability Server

CCRM

1995

2002

2004 2007

Probabilistic Upgrading

Promotion Manager

2011

2014

2013

Pre

1995

Demand Tracking System

2015

2016

Hotel Revenue Management Model

CCRM/DTS Online

Personalization

Hybrid HROS

Rules Based RM

StrategicValue

Group & Space

Optimization

Itinerary Planning

Tool

Enhanced Optimization

Rate Category Realignment

2017

29

© Disney30

“Let your past inspire you, let it motivate you, but never let it hold you back.”

- Walt Disney

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

Flaw of Averages

31

You Are Never Finished

© Disney32

© Disney33

© Disney34

“If you can’t explain it simply,

you don’t understand it well enough.”

- Albert Einstein

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

Flaw of Averages

You Are Never Finished

35

© Disney36

Ability to produce results and the

ability to consume results

- Professor Sam Ransbotham,

Boston College

© Disney37

© Disney41

© Disney42

© Disney

Investment Profile

Evangelizing Analytics

Speed to Market

Talent

Importance of Integration

You Are Never Finished

Flaw of Averages

40

© Disney41

“Flaw of Averages”

- Sam Savage, author

© Disney42

When U.S. Air Force discovered the . . .

flaw of averages

© Disney43

ROOM TYPE

Standard Preferred

RATE $100 $110

CAPACITY 10 5

AVERAGE DEMAND 15 4

Cost of Being Wrong

Often, a resort will have sufficient or excess demand to fill its capacity; however, it will not always be a perfect fit to the mix of

room categories.

How many of the preferred rooms should be “protected” for Guests willing to pay a preferred rate versus over-selling

additional standard rooms?

Capacity = 15 rooms

Demand = 19 rooms

© Disney44

$10 $100VS.Under Protect Over Protect

Cost of Being Wrong

© Disney

$110

$101

$78

$55

$32

Prob Rate EMRR Prob Rate EMRR

1 100% $100 $100 1 100% $110 $110

2 100% $100 $100 2 92% $110 $101

3 100% $100 $100 3 71% $110 $78

4 100% $100 $100 4 50% $110 $55

5 100% $100 $100 5 29% $110 $32

6 100% $100 $100

7 100% $100 $100

8 100% $100 $100

9 100% $100 $100

10 99% $100 $99

11 98% $100 $98

12 90% $100 $90

13 83% $100 $83

14 66% $100 $66

15 50% $100 $50

Preferred Demand

Capacity

Stan

dar

d C

apac

ity

Exce

ss S

tandar

d

Dem

and

Standard Demand

Capacity

Pre

ferr

ed

Dem

and

45

Only protect 2 preferred room types and oversell the standard room type by 3;

a $40 gain ($1,481 vs. $1,441 in expected revenue)

Cost of Being Wrong

Comparing

EMRRs

© Disney

“Any organization that is not amath house now or is unable to become one soon is already a legacy company.”

- RAM CHARAN, AUTHOR

The Attacker’s Advantage:

Turning Uncertainty Into Breakthrough Opportunities

46

In today's global analytics arms race, YESTERDAY'S STRATEGIC ADVANTAGE CAN QUICKLY BECOME TOMORROW'S INDUSTRY STANDARD.

To stay competitive, we must continue to invest and evolve at an ever increasing rate.

© Disney47

THANK YOU!