I have been fascinated by this new world around the Web 3.0 Economy and everything around Blockchain, Cryptocurrencies, NFTs, Smart contracts, DeFi, Decentralized Storage and the Metaverse. This has (and certainly will) changed the way we live our digital lives forever, and the most exciting part is that we are only at the very beginning of it!
I have also been asking myself what jobs would be relevant in this new economy (yes I am trying to remain relevant there!) and if some forms of optimization and revenue management, similar to what we currently apply in the real world, could be applied to the Web 3.0?
In this article, I am focusing on the Metaverse, as I believe this is the closest/most similar environment to our current world and day to day activities.
What is the Metaverse?
While it is quite hard to define it, we can mention a working definition:
“The “metaverse” is a set of virtual spaces where you can create and explore with other people who aren’t in the same physical space as you. You’ll be able to hang out with friends, work, play, learn, shop, create and more.” (Facebook, 2021)
A metaverse is simply a wide expanse of digital space where users can interact with each other in real-time and get similar experiences to what they experience in the real world, and in most cases even more. This definition of the metaverse highlights a crucial point – the fact that it is a wide expanse of a digital realm that can be said to be continuing the realm of the “real world”. The only reason why we put the real world in double quotes is that it is conceptually hard to distinguish between what the metaverse is and what the “non-metaverse” is.
Are Revenue Management principles applicable in the Metaverse?
Let’s review if the criteria are present in the Metaverse for effective use of revenue management:
- Work in a fixed capacity environments?
Yes (and no, it depends on how you see it). The Metaverse itself is an extension of what we define as real. Because it is not limited by the physical spaces of the world that we live in, it can be said to be extending to infinity. Having said that, some part of the metaverse could become limited in space (private parties, special events, access only environments or games) or even special/limited/unique NFT available. Here comes the Revenue Manager 😎
- Have perishable or time-sensitive products?
Yes. First, as mentioned above, all types of special and limited events accessible to only limited paid users would be perishable and time-sensitive products. Then with a new (digital) economy comes a new range of jobs and services (where we can apply the usual demand/supply principles). A few ways users in the Metaverse can make money:
- Content creation (where users can create assets to be used in the Metaverse and these assets can be bought or traded). Think of artists, architects, fashion designers, event hosts, community managers, curators, game creators, …
- Transactional talents (brokers in the Metaverse to sell your NFTs, to sell your contents, to promote your special events inside and outside the Metaverse). Think of real estate agent, ambassadors, sales and brokers.
- Exploring the platform (Metaverses guides to help you discover new insights, key information about the platform or some story telling about some specific spaces in the metaverse.) Think of virtual tour guides.
- Transportation? (this one I am stretching it a bit as I am not sure how transportation could look like in the metaverse. Does it happen like teleportation? Or do we need to move from one part of the “map” to another?). We could imagine some type of public and private transportation system, which in this case we could replicate the exact same revenue management principles to optimize limited spaces.
- Digital tourism (virtually visiting a museum for example, or allowing users/tourists to build his or her own travel experiences so that these satisfy a wide range of personal needs, from pleasure to a search for meaning – Think Westworld!!)
All of the mentioned areas could benefit from economics 101 principles and the application of revenue management.
- Face varied but predictable demand over time?
Yes. Demand for specific limited time events could mainly depend on the organizers (different demand for Snoop Dog hosting his annual party in the Metaverse and my mom organizing the monthly gathering of the Thermomix fans in the Metaverse). Quite sure we can see different seasons in the year when people are more connected to the Internet than some other times, this correlation would continue in the Metaverse (even more important if it starts to apply within the working environment). Therefore, different periods, events and seasons could be yielded differently and certain type of forecast could be applicable.
- Have a high proportion of fixed costs and a low proportion of variable costs?
No. And that’s probably the main difference with the “real world” and the digital Metaverse, is that the costs are quite limited. Yes, costs are high for new content creation (time spend building it, staff needed to build content, …) but there are no fixed costs or variable costs (or very very limited). However, I don’t see any reasons this should be a roadblock to apply Revenue Management principles in order to optimize revenue for specific items, services and events in the Metaverse (think of making the most of your bucks for your investment in the Metaverse).
Based on the elements above and our understanding of the Metaverse, we could definitely see some opportunities for Revenue Management to be applicable. Think about this for a minute… we could even replicate our current tech stack and some job functions to the Metaverse: the first PMS in a digital world, a digital CRM to manage guests in special events or spaces within the Metaverse, a Revenue Management System able to dynamically priced some area and elements of the Metaverse or even a full running digital hotel running in the Metaverse. This is a whole new world of opportunities that we are opening, and I am quite excited to see how this will continue and evolve. Just a fad and in a few years we will not be talking about it anymore or is it a real game-changer and how business will be conducted in the future? Only time will tell.
Catala Consulting ranks amongst the market leaders in the field of hospitality, tourism and revenue management consulting. With clients in 20 different locations and over 8 countries, Catala Consulting is a truly global player and aims to change the way hotels approach revenue management.
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- Facebook, 2021: https://about.fb.com/news/2021/09/building-the-metaverse-responsibly/
- Erdem, A., & Şeker, F. (2021). Tourist Experience and Digital Transformation. In Handbook of Research on Digital Communications, Internet of Things, and the Future of Cultural Tourism (pp. 103-120). IGI Global.
- Duan, H., Li, J., Fan, S., Lin, Z., Wu, X., & Cai, W. (2021, October). Metaverse for social good: A university campus prototype. In Proceedings of the 29th ACM International Conference on Multimedia (pp. 153-161).
- Matthew Parsons (2021, December). Amadeus Ponders the Metaverse in Next Phase of Microsoft Partnership. In Skift
- Rafat Ali (2021, December). Airbnb CEO Brian Chesky on the Future of Crypto & Metaverse in Travel. In Skift