A recent survey has indicated that companies in the travel, transportation and hospitality industries are achieving strong revenue increases up to three percent using advanced pricing and revenue management technology.

Published: 14 Oct 2010

A recent survey has indicated that companies in the travel, transportation and hospitality industries are achieving strong revenue increases up to three percent using advanced pricing and revenue management technology.

According to JDA Software Group, with the success of revenue management in the airline industry, other industries such as hospitality, passenger rail and cargo transportation have begun to adopt similar approaches to pricing and revenue management that enable accurate demand forecasting, pricing and revenue optimisation.

JDA polled 120 travel company executives at its 2010 Pricing & Revenue Management Conference earlier this year to identify the business impact of using pricing and revenue management technology. The survey revealed that more than three quarters of the respondents made over 1 percent in additional revenue gains, while close to a third claimed as much as a 3 percent gain. A total of 96 percent reported a positive return-on-investment (ROI) within three years, while 42 percent achieved ROI in the first year.

Andy Archer, regional vice president, Pricing and Revenue Management Group, JDA Software, said, “This year’s survey found that as market forces change and price transparency continues to increase, this technology will continue to grow in importance. In an era of competitive price transparency, understanding how to effectively integrate optimal pricing as part of the overall revenue management strategy simply helps companies make more money.”

Whereas price flexibility is accepted by consumers in certain industries, particularly in passenger air transport, consumers are still very sensitive to price fluctuations in passenger rail. Rail companies in the U.K., for instance, have less flexibility in making price adjustments because of government restrictions on ticket prices and conditions.

Recommendations

JDA recommends seeking pricing and revenue management solutions that deliver an integrated approach to balancing supply and demand through the following capabilities:

• Demand Forecasting – Advanced demand forecasting analyses the price elasticity of demand and its effect on a consumer’s willingness to pay, providing companies with the comprehensive visibility they need to shape demand.

• Price Optimisation – Through price optimisation, companies can improve their pricing strategy and set optimal prices based on competitive rates, capacity restraints, local market demand, and economic and other company factors. A well-defined strategy will allow the company to capture maximum revenue and market share.

• Revenue Management – With automated revenue management, companies can gain a competitive advantage by allocating the right amount of perishable inventory or constrained capacity to the right customer segments to achieve maximum profitability.

• Asset Optimisation – Optimising asset utilisation is critical to driving revenue. By using a sophisticated solution, companies have the ability to analyse and implement high-impact network decisions, improve utilisation of inventory and capacity, balance supply and demand, and improve business processes and efficiencies.

(Survey respondents were comprised of the following industries: rail (28 percent), followed by hotel and leisure (18 percent), tour operators (12 percent) and consulting (7 percent). Of those companies reporting increased profits, almost all were utilizing advanced revenue management technology).