Thursday, November 13, 2008

The importance of Price vs. Revenue in a Downturn

As the economic downturn starts to take hold across many countries, a downward turn in demand for travel is starting to affect many travel companies worldwide. This poses key questions - should revenue managers be chasing profit or revenue during this period? Is there a simple strategic solution to leverage revenue management during an economic downturn?

Dr. Reed Holden, co-author of ‘Pricing with confidence' and contributor to the Revenue Management Forum, suggests one solution many companies turn to is to cut costs and drive efficiency. This is fine and serves to increase profit margins however he warns solely relying on this strategy is not enough as you can only cut costs so far before the quality of your product and service becomes impaired.

Another solution is to offer more discounts to hit revenue targets. The main problem with this is the advent of price wars. In the Asia Pacific region EyeforTravel Research has already found that price wars have become an issue in the hotel sector. The impact of such wars can only be damaging for all companies involved.

An interesting point that Dr. Holden makes is that one of the keys to success in a downturn is to stop chasing unrealistic revenue goals with price discounts. ‘Chasing declining revenue with price discounts just makes the problem worse-you end up with less revenue and no profit. Smart pricers look for ways to eliminate discounts, especially on high value products and services--even in a downturn!'

He highlights the example of Ford Motor cars who predicted many months ago that a downward turn in demand was on the cards and so cut capacity and stopped discounting their prices. They are now one of the few automotive companies to still be making a profit.

To find out more about how your company can optimally price and manage revenues during this period, leading revenue managers from Aer Lingus, Air Malta, Avis, Best Western, Choice Hotels, Club Med, Czech Airlines, Expedia, Hilton, Scandinavian Airlines, Spanair, Thomas Cook, TUI, Virgin Holidays and more will be meeting in Munich, 2-3 December at EyeforTravel's Revenue Management & Pricing in Travel Europe conference.

They will be discussing how to manage revenues and set the right prices in an economic downturn. They will also be examining how the role of revenue management in travel companies will evolve over the next 5 years as well as key topics such as forecasting, consumer-centric revenue management practices and much more.

For more information please see or contact

To see who will be attending this event please visit or scroll to see the list below. Note that early bird prices expire Friday 7th November.

You can read the full post from Dr. Holden mentioned in this article at

Source : Ehotelier
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