EFT Amsterdam SpecialEurostar Group has implemented a new revenue management system in 2006, which allows the company a greater control over a much higher proportion of trains and provides a more accurate demand forecast.

Published: 10 Dec 2006

EFT Amsterdam Special

Eurostar Group has implemented a new revenue management system in 2006, which allows the company a greater control over a much higher proportion of trains and provides a more accurate demand forecast.

John Waddington, manager of revenue management, Eurostar Group says the
company has reacted to the increase in demand for its Business Premier product
throughout 2006, developing an optimal capacity strategy for peak-Business
departure times.

"We also have a better understanding of the requirements of our Leisure Select
travellers and have implemented an improved dynamic-pricing strategy for this
product. We have also focused on improving our understanding of demand across
different markets at a micro-level, to ensure that we are taking advantage of
all opportunities not only in the UK but also importantly in the French,
Belgian and International markets," he says.

Last year, Waddington had shared that the real successes from an RM
perspective relate to the times of peak travel, where a significant amount of
effort has been invested in forecasting and understanding demand at the highest
prices.

On the same he says, "We are still investing significant amounts of effort in
understanding traveller demand around peak times and special events across
different markets, because this effort is vital to optimizing the use of
Eurostar capacity at these times. It is also important not to over-look the
off-peak travel times, where we are able to optimize capacity by offering
attractive prices close to departure for our Leisure travellers."

"The introduction of the new RM system means that we are now able to provide
price-sensitive forecasts for all trains, allowing us to understand what the
future demand is likely to be at current price-levels. Focusing on the quality
of the data and identifying the historical impact of special events is now a
key work process for us to develop the quality and accuracy of the forecasts,"
he adds.

Waddington shared more information in an interview with EyeforTravel.com's
Ritesh Gupta. Excerpts:

Last year you told me - Eurostar is trying to understand how customers make
their choices and adapt our website and sales procedures to allow the customer
to make their choice with as least effort as possible. What kind of progress
have you made in this regard?

The automated Revenue Management techniques that we have applied since the
launch of the new system means that we are now able to make a range of prices
available throughout the day, ensuring that there is availability at the
appropriate price levels for our travellers.

The new releases of the Eurostar website in 2006 makes it easier for our
travellers to see the range of prices available and make an informed judgement
between departure time and price. It also provides an enhanced upgrade message
allowing them to select the most appropriate product for them and has an
improved search facility for the Avignon and Ski routes. The website also now
includes the option to use a promotional calendar, which enables us to capture
a higher proportion of the demand during promotions.

All of these improvements are designed to allow our travelers to find the most
appropriate fares for them, and the enhanced website has been a key tool to
drive volume towards our off-peak services.

You had referred to much more integrated and successful Promotions and Sales
activity through close tie-up with other divisions. How is this yielding
results for your organisation?

For every Eurostar promotion an integrated RM, Pricing and Sales & Marketing
strategy is developed to ensure that realistic targets are set for the
promotion, in line with the requirements of the business at that time. This
means that clear expectations are set across the business for each promotion
and that the targeted volume of travellers matches the available capacity. This
ensures that the impact of the promotion is fully optimised whilst at the same
time limiting the revenue damaged through dilution and reducing the volume of
availability complaints.

RM priorities can regularly conflict with sales and marketing targets, either
through day-to-day sales activities or through targeted strategic promotions.
What do you think is the key to counter this?

The role of the RM team means that there are natural conflicts with Sales and
Marketing volume and promotional targets. The clear promotion process mentioned
above is key to making the volume-driving strategies a success, and it is
necessary to develop a long-term planning process to ensure that promotions are
run at the appropriate times.

A close working relationship between RM and the Sales & Marketing teams is
imperative to make this process work successfully and clear communication
between the teams is also vital. It is also necessary to integrate the RM
strategies into the long-term budget planning process to ensure that the RM
activities are in-line with the long-term financial targets.

How far can RM systems support Dynamic Pricing decision-making and how can the
price-levels be determined automatically if forecasted prebooking pattern &
price sensitivity models are in place?

The Eurostar Revenue Management system allows dynamic-pricing decisions to be
applied automatically through a rules-based model and which vary depending on
current and forecasted demand levels. Price-sensitivity models exist which
provide demand forecasts at relevant price levels and these can be adapted to
work alongside optimisation models. However, optimal revenue targets for
Eurostar must be achieved alongside other constraints across the business and
the challenge will be to build these external factors in to the optimisation
models.

What are the resulting differences between more "static" pricing and dynamic
pricing models - which suits your business more?

Static pricing provides a clear price message to travelers and allows
traditional price "fences" to be implemented to protect yield levels. Dynamic
pricing is much more powerful and flexible, allowing price levels to be
adjusted quickly to take advantage of shifting market dynamics and short-term
business opportunities. For Eurostar, large levels of excess capacity on
certain trains means that it is necessary to combine static pricing with more
dynamic pricing methods to fully optimise revenues.

Developing, implementing and successfully applying a new Price-Sensitive RM
system was on top of your agenda for 2006. How successful you have been and
what's on for 2007?

During 2006 we successfully implemented a new price-sensitive RM system,
which, after only five months of operation, is starting to show the benefits
that we originally anticipated.

The major focus for us in 2007 is the move of the Eurostar UK station to St
Pancras International in November, the opening of the new high-speed line, High
Speed 1, and a new station at Ebbsfleet, close to Dartford and the M25. The
challenge for Revenue Management is to understand how the move will affect
travellers' behaviour and to make sure that a suitable capacity strategy for
each of these is in place to allow optimal performance of our new schedule.

The Rugby World Cup in France is another key opportunity for us in 2007 where
there will be significant demand of rugby fans travelling to the matches in
Paris and to stations throughout France.