Flexible ticket pricing system gets on track

Eurostar has used revenue management systems for some years

Train operators are following in the footsteps of the airline industry to implement flexible ticket pricing systems, but the process is proving to be a challenge.

Revenue management (RM) software helps manage prices based on costs, customer expenditure and passenger demand.

After winning the eight-year franchise for the CrossCountry line, a priority for train operator Arriva was to make full use of RM, said business development manager Danny Gilbert.

“Understanding the behaviour of our customers and being able to have control over demand and the service we supply is critical to our business,” he said.

“But implementing an RM system to manage a £600m business is a very complicated task.”

Virgin managed the CrossCountry franchise for 12 years and used its own RM system
before Arriva won the tender in November. But Virgin refused to share its EDS-developed software.

“We tried negotiating with Virgin to use its system temporarily, but they were unwilling to help,” said Gilbert. “And the EDS system was too expensive and limited
in terms of what we wanted to develop,” he said.

“It is possible to manage the process manually to a certain degree, but visibility of volume of passengers and seat offering is massively reduced.”

Arriva has started implementing a revenue optimising system provided by supplier JDA. Plans include adding advanced functions such as price sensitivity analysis by 2009, a tool that is only used in the UK by Eurostar.

The channel tunnel service has used RM systems for years and is able to model scenarios to view the potential impact on revenue.

Price-sensitive technology is still a novelty across the industry, but is instrumental for remaining competitive, said Eurostar’s revenue optimisation senior manager John Waddington.

“The system enabled us to more than double the number of pricing decisions processed by the team,” he said.

“And we are now able to inform various departments how busy a train is likely to be.”
Train operators are trying to replicate the airline experience, but the nature of the business poses challenges, said First ScotRail pricing and research manager Kenny McAlpine.

“Most rail passengers still buy tickets at stations, so we are using manual research to analyse their behaviour,” he said.

Smartcards are the most obvious way of tracking commuter habits, but the prohibitive cost is discouraging train operators, said Butler Group analyst Sarah Burnett.