Revenue Management post-Covid

A sticking plaster won’t do – revenue management post-Covid

Travel was one of the worst-hit industries in the pandemic, many would agree. One casualty was legacy revenue management systems (RMS).

These once-reliable workhorses that forecast demand, optimise pricing and maximise revenues, stumbled.

The industry is working hard to become more robust, responsive and agile after the body-shock of the pandemic.  Its success may partly depend on how it embraces innovation and new revenue management strategies.

RMS traditionally rely on historical data patterns to forecast future demand. Due to radical upheavals in demand and supply during the pandemic, accurate data is not there anymore.

When making decisions based on these forecasts, eg when to release the cheaper seats, RMS’ volume-based model is relatively un-nuanced and, therefore struggles to cope.

Fundamental shifts in leisure traveller behaviour and preferences are one challenge. Stay-cations, bespoke experiences and ‘revenge travel (which may or may not last) are increasingly popular.

Uncertainty and volatility in current market conditions make accurately predicting demand a formidable task for RMS which rely on historical data and stable patterns.

The dynamic regulatory environment during the pandemic piled on another layer of complexity.

New/changing health protocols and requirements meant an influx of new data. Maintaining revenue management while ensuring compliance became a formidable task.

Price-sensitivity is perhaps the defining challenge for RMS. Price is now critical for many travellers amid economic worries. Meanwhile, business travel, assumed to be schedule-sensitive and a reliable high-yield revenue source, has declined.

In this altered climate, it has become hard for RMS to balance competitive pricing with revenue maximisation. Wedded to volume models, RMS cannot easily take on board alternative value propositions, say, or flexible booking for undecided travellers.

Finally, rapid digital transformation has posed a challenge. Rapid adoption of online platforms means systems must respond quickly to changing consumer demands, requiring an agility RMS do not possess.

To become more resilient and customer-responsive, travel businesses need to look at strategies and paradigms the move away from RMS. Some travel providers are indeed investing in systems that incorporate advanced technologies more suited to interpreting real-time data and responding flexibly.

At Journey Mentor we recognise the shortfalls of legacy RMS. Our disruptive products use advanced technologies that enable time-critical competitive decision-making, dynamic pricing, and the best deals for customers.