Revenue Management Readiness
The COVID-19 crisis continues to have a major impact on Passenger Rail, but with countries progressively seeing increases in demand across all forms of transportation, Rail operators sights are now focused on building recovery plans in order to get back on track. The objective of these plans is to be ready for what is now becoming a frequently used term, the “New Normal.”
With the sudden drop in demand and uncertainty on whether demand will ever go back to what they were pre COVID-19, this is forcing Revenue Management and Commercial Leaders to adapt and rethink their approach to Revenue Management.
As operators begin their journey to recovery, they are faced with a high degree of uncertainty related to various challenges that will arise from the impact of COVID-19
To address these new challenges, Rail operators need to develop an understanding of their current state and the factors that will either influence or hinder their recovery. Using our experience across Rail and other verticals, we have developed a ‘3 step plan for Revenue Management Readiness’, which will be shared over a series of 3 communications.
It is important that in this volatile environment Rail operators ensure they have the right demand and pricing strategies in place to reduce the risk of dwindling revenues while managing the well-being of their customers.
The Rail operators with the right set up and flexibility to react to the new environment are the ones that will remain the strongest and emerge from this pandemic ready to serve their customers in the “New Normal.”
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Stage |
How do I know I’m here? |
What’s the summary? |
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Stage 1 - Reset |
You have seen the bottom of demand and are seeing week over week demand growth across most of your network. |
Your beginning to recover, but you need to shift your forecasting and strategies to focus more heavily on the near-term. |
This is the current state of Rail right now, Rail operators are either increasing capacity or opening more routes. During this period operators have been focusing their time on the safety of their passengers. InterCity operators have resumed operating with reduced frequencies and scaled back staff, with most international Rail travel on hold due to worldwide restrictions. The Rail industries approach to pricing has been to fix the price of a ticket which has made the need for a Revenue Management system redundant. This allows the Revenue Management and commercial teams to set new strategies to encourage travel for when restrictions are lifted.
When restrictions have been lifted Revenue Managers will have the difficult challenge of forecasting demand, bookings, and revenue due to the lack of historical data and high volatility. Close attention should be paid to search data and booking activity as well as any further restrictions to travel. With the predicted slow growth of commuters and the potential of reduced staff, operators should look to lean on machine learning capabilities to address the numerous manual tasks, helping you improve decision making and identifying revenue opportunities across your complex networks and numerous flows. This will help you stay ahead of competition and identify new revenue opportunities.
Since current demand is lower than pre-COVID numbers, operators will need to seek new data sources or modelling techniques to overcome the loss in granularity when it comes to demand forecasting. One tactical item is to focus forecasting more heavily on recent trend either a) by using more machine-learning based approaches (random forest for example) or b) shifting forecasting focus to be purely on recent trend (we have seen on average 5-10% growth week-over-week).
Understanding immediate demand patterns is key to ensuring Revenue Managers develop the right revenue optimization strategies for their top OD’s. Nothing will be perfect, but there are simple, yet effective, ways to incorporate your passenger’s new travel patterns into effective Revenue Management strategies. 
