News for the Hospitality Executive
by Ritesh GuptaAbout EyeforTravel
March 6, 2013
Be it for the nature of the business, organisational structure or even the agreements signed for third party distribution, there are many ways that pricing as a discipline differs at airlines vis-a-vis hotel companies. However, while there are some similarities in how the two entities price their products, there are more differences.
When it comes to similarities, most companies take advantage of travellers’ tendency to plan ahead, and offer discounts to price-sensitive customers who are willing to plan in advance. Customers who are willing to book late and pay higher fares or rates may see prices hiked. In addition, competitive pricing is a significant influence on pricing decisions.
All hospitality and travel entities deal with many of the same basic types of customers:
When it comes to differences between the two, hotels represent the most commoditised sector of hospitality and travel. When you delve deeper airline pricing comes across as an arduous task. For example:
There are several ways in which airline pricing organisations differ from hospitality pricing organisations, says Alex Dietz, principal product manager, SAS.
1. Centralisation: Airlines are very distinguished from most hospitality organisations in that the pricing function is nearly always centralised – and this is true even for large international airlines.“Each of these roles typically has their own decision support system to assist them – and these systems are quite different. These roles may report up through separate functional organisations (ie: a ‘pricing department’ and a ‘revenue management department’), or they may work in a geographically combined team (eg: ‘Pricing and Revenue Management: Trans-Atlantic’),” says Dietz.
2. Systemisation: Virtually every airline utilises some type of RM process – and most airlines use some type of automated system. This type of automated RM solution is much more prevalent in airlines than other hospitality and travel sectors.
3. Specialisation: The airline pricing function is nearly always split into two types of specialised roles:
a. Pricing and Fare Management – This role manages fares, fare publication, fare rules, and fare distribution, including monitoring competitive changes on a daily (often several times a day) basis. This role is also usually involved with pricing strategy. A typical pricing analyst manages a large number of markets – anywhere from 20 to 100 or more, depending on the airline.
b. RM – This role manages the availability of fares that have been made published or distributed to partners on each flight departure and connecting itinerary. A typical revenue management analyst also manages a similarly large number of markets.
Airlines have it tougher?
According to Dietz, a number of factors make airline pricing challenging, including:
This means that airlines are able to ‘undercut’, if they choose to do so. This type of practice is not typical, though – airlines generally force OTAs, for example, to compete on an even playing field with regards to fares. Most airlines also do not typically undercut these partners with special pricing that is readily available on their own booking site – even though that site typically produces reservations at lower costs than these other partners.”
On the other hand, the battle for price parity is quite intense in case of hotel companies.
From a hotel company’s perspective, Andrew Lau, director of revenue management and distribution, Marco Polo Hotels, says maintaining rate parity across distribution channels is one of the critical success factors in today’s distribution strategy. With the growth in use of the Internet, hotel rates are more transparent than before. And in addition with the Best Available Rate strategy, package pricing is more or less being eliminated. “Everything is based on BAR. Geographic is no longer a fence,” says Lau.
Overall, airline fare management and revenue management are very complex processes, and things can fall through the cracks – just as they can for hotels – and pricing ‘specials’ and ‘deals’ come and go.
The volatile business of airlines makes pricing seems to be more challenging owing to the extremely competitive nature of the industry and the intense battle in international markets which have been deregulated for many years.) Indeed there are many external and global factors influencing their financial performance.
For more insights from Andrew Lau, director of RM and distribution, Marco Polo Hotels, and SAS Institute join us at the Travel Distribution Summit in Singapore from May 28-29.
EyeforTravel’s mission is simple: We are in the business of providing high-level business intelligence, knowledge-sharing and networking forums in the form of B2B conferences & exhibitions, exclusive news, analysis and research for the rapidly expanding global online travel & hospitality industry. We can put you at the heart of our global industry network and give you the strategic edge to outperform your rivals and business goals. Find out more at www.eyefortravel.com
Director of Events & Industry Analysis, EyeforTravel
London, UK +44 (0)207 375 7229
US Toll Free: 800 814 3459 (Ext. 7229)
on Merging Hotel Operations with Hi-Tech for the New Digital World Order
/ Pamela Whitby / February 2013
Ultimate Customer Experience: Four Key Trends in the Evolving Online
Space / October 2012
in Action: Meet 5 new companies battling it out for the EyeforTravel
innovation crown in 2013 / September 2012
Heat is On: Five Online Travel Trends Set to Explode / September
Terrific Opportunity: Your Customers on the Go with New Search Tools
/ August 2012
Global and Think Local: How Not to Get Lost in Translation / August
Rising Mobile Tide: Five Trends for 2012-2013; Putting in place a
mobile strategy is no longer a nice-to-have, it is the essential weapon
in a fast-paced and competitive sector. EyeforTravel.com identifies
some emerging themes / August 2012
Tough Job: Targeting the Fickle and Attention-Deprived Travel Consumer
/ Ritesh Gupta / July 2012
Management Must Overcome Several Challenges to Create a Bigger Impact
/ Ritesh Gupta / July 2012
Storm in a Teacup and Lessons Learned / Ritesh Gupta & Pamela
Whitby / July 2012
and Don'ts for Travel Campaigns on Facebook / Ritesh Gupta /
Travel Marketing Strategies Based on the Strength of the Devices /
Ritesh Gupta / February 2012
the Expectations of Last Minute Mobile Bookers; Customer Expectations
are Driving Changes in the Online Travel Business / Ritesh Gupta /
2012 is Going to be 'The Year of SoLoMo' (Social, local, and mobile)
/ Ritesh Gupta / January 2012
How to Measure Social Media: An Interview with Barbara Pezzi, Director
of Analytics & Search Optimization, Fairmont Raffles Hotels
International / December 2011
& Hospitality Brands Need to Make Mobile a Top Priority for 2012
/ December 2011