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Maximizing Revenues on State Corridors Pricing Best Practices September 24, 2013. Agenda Fare Increase Strategies Fare Restructuring Promotions/Specials. Fare Increase Strategies Should be Customized to Circumstances.
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Maximizing Revenues on State CorridorsPricing Best PracticesSeptember 24, 2013 Agenda • Fare Increase Strategies • Fare Restructuring • Promotions/Specials
Fare Increase Strategies Should be Customized to Circumstances • A planned annual fare increase is one of the most effective methods for increasing revenue • Baseline yearly increase of 2%-3%: • Creates predictability – important when serving commuters, in particular • Generates minimal controversy with a relatively small price change • 2% increase – roughly the cost of living increase – is generally expected to have no negative ridership impact • Effective immediately with additional revenues generated shortly after release • Increase baseline can be adjusted depending on economic and financial requirements • For revenue-managed trains, variations on flat fare increase can minimize ridership and/or revenue risk. Scenarios include: • Increase applied on highest fares only • Mitigates risk on revenue-managed routes as the increase only applies where the train is selling out at the highest prices • Lowest selling fare is unchanged and targets the most price sensitive customers • Effective tactic during specific holiday periods • Apply a variable percent increase based on the revenue managed fare bucket; example: 2% on D, 3% on B/A, 4% on Y • Small increases done more often throughout the year • For non-revenue-managed routes, consider peak/off-peak (e.g., day-of-week) pricing
Fare Restructuring Methods Based on Ridership & Revenue Statistics
Best Practices for Promotions and Special Events • Carefully designed terms and conditions can maximize demand stimulation and revenues, while minimizing risk of revenue dilution • A limited sale period increases the sense of urgency to purchase • Long booking windows that match a long travel period are best suited for programs such as CVB, tour, etc. • At least one day advance purchase requirement minimizes revenue dilution • Use of specific buckets (if revenue managed) or specific departure times and/or day of week, drives traffic into the off-peak departures, thereby reducing revenue displacement and dilution • ‘Online only’ fares drive traffic to lower cost distribution channels • Recent launch of Fare Families on Amtrak.com improves customer experience • Promotion/advertising of existing prices is often the best approach • Special situations or seasons deserve more aggressive approaches • Response to bus competition includes both pricing and capacity tactics: • Additional capacity on peak departures • Introduction of new lower advance purchase fares supported by marketing • Flash sales promoted with intriguing prices for limited sale and travel periods • Peak holiday dates and high demand events merit additional capacity, if available • Group movements are well suited to excess inventory; however, high cancellation rates (70%) require strong ticketing requirements to minimize risks