News for the Hospitality Executive |
by Ritesh
Gupta
About
EyeforTravelMarch 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. These include: 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
|
Contact:
Rosie
Akenhead Director of Events & Industry Analysis, EyeforTravel London, UK +44 (0)207 375 7229 US Toll Free: 800 814 3459 (Ext. 7229) |
To Learn More About Your News
Being Published on Hotel-Online Inquire Here