Travel Operators
- Airlines
- Hotels
- Car rentals
Between 40% and 60% of revenue is generated with negotiated rates in the business segment (corporate contracts, business groups) and in the leisure segment (through tour operators and web distributors). An analysis of negotiated rates often reveals high discounting levels and important disparities that cannot be explained by tangible factors. The following table presents top challenges of travel operators regarding negotiated business and key benefits delivered by OP for Business Contracts (OP)
Top challenges |
Benefits delivered by OP |
|---|---|
| Complexity managed by “rule of thumb” - Prices vary by product, destination, season, day of week and reservation lead-time - When anticipated demand is higher than capacity, each inventory carries an opportunity cost which reflects the probability of displacing revenue if a booking for a future date is accepted at a given point in time |
Precision quotes - OP simulates the expected value of a deal (i.e. its revenue minus its variable and opportunity costs) taking into account the intended rate, the travel profile (i.e. the expected bookings by product, destination, period, lead time..) and the opportunity and variable costs that are generated. - Different rules can be applied depending on the type of deal (corporate contract, distribution contract, leisure/business series or ad-hoc group) |
| Uncontrolled discounting in the field - Due to pressure on prices, discounting is a key lever used by account managers to close deals - Price inconsistency and disparities between customers cannot always be explained by tangible factors |
Score and workflow to drive sales behavior - The score reflects the quality of each deal according to the applicable pricing policy - Pricing workflow permits to get the different validations and approval for price exceptions. They may involve different stakeholders: sales, pricing/RM, operations, credit control, billing… |
| Contract compliance risks – For recurring contracts (corporate contracts and distribution contracts): price is fixed whereas travel profile is uncertain - Many contracts have actual volume lower than expected or changes in travel profile (such as destination, season and day of week mix) with negative impact on profitability - Adjusting price of contracts showing deviance with initial assumptions has a significant impact on margin |
Systematic contract monitoring - Enables to seize all re-rating opportunities -Compares on an on-going basis actual travel profile with committed profile. Any deviance is reported through a system of alerts - Recommends the rate plan that corresponds to customer’s actual travel profile |