What a week! The challenge of maintaining revenues in this period of economic uncertainty

It’s certainly been a turbulent week and one that has left many business managers with so many unanswered questions. With the global economic turmoil set to continue for an indefinite period, where does this leave your business? How can you continue to make key business decisions whilst no longer being able to accurately predict demand or consumer wants and needs?

Published: 09 Oct 2008

It’s certainly been a turbulent week and one that has left many business managers with so many unanswered questions. With the global economic turmoil set to continue for an indefinite period, where does this leave your business? How can you continue to make key business decisions whilst no longer being able to accurately predict demand or consumer wants and needs?

There’s no doubt that consumer confidence has been knocked by a noxious combination of tumbling house prices, rising unemployment, falling share prices, rising fuel costs, and increasing levels of inflation. But how robust is the travel industry?

The airline industry is arguably most affected by the downturn. A spokesperson from British Airways said "We are in the worst trading environment the industry has ever faced and must take action to offset the combined effects of the continuing global economic downturn, weakened consumer confidence and high fuel prices," British Airwayssaid.

Analysts say that consolidation in the airline industry might be the only way forward for many airline operators and more airlines could go out of business, especially smaller ones that are unable to pass on the higher costs to itscustomers. This week we have seen low cost carrier Ryanair slashing operational costs by asking their employees to take unpaid leave and their executives will take a 10% pay cut.
Then there is the issue of managing falling demand. Matt Cheevers, MD for Teletext Holidays, said that the next three months in particular would be "tough". Searches on Google for 'holidays' and 'cheap holidays' this week (26 September 2008) were down 26%, against last year's seasonal drop of 6%. "There is a massive reduction in initial demand," he said, "but it will come back. There needs to be consolidation; there needs to be failures."
To avoid being among the failures, many travel companies aim to cut back on operating costs. Simply cutting costs however is unlikely to prevent the damaging effects of imminent recession. Travel companies need to also set the right prices to entice customers, to maximize revenue and avoid rate erosion over the long term. Identifying key customers, accurately forecasting and managing demand are vital for many travel companies to survive.

Forecasting tools poses a major challenge for many travel companies operating in a buoyant economic environment let alone in an unpredictable global economy. There are so many questions arise - what is the required accuracy of the forecasts? Have we become over-dependent on statistical models? What is the trade-off between using automated statistical tools vs. individual humanistic judgment? There is no straight forward answer to such questions however Joerg Esser, Head of Yield Management & Business Development, Thomas Cook Nederland BV, will be sharing his expert opinions at EyeforTravel’s Revenue Management & Pricing in Travel Europe 2008 conference.

Chris Silcock, VP Revenue, Service & Delivery, Hilton International and Warren Mandelbaum, Head of Revenue Management, Whitbread Hotels & Restaurants will be tackling the topic maximizing revenues, protecting profit and setting the right prices in the face of economic slowdown. While leading speakers from Aer Lingus, Airmiles and Sabre will be discussing the key topic of identifying and targeting your most valuable customers.
Industry discussion, networking and knowledge sharing in this period of uncertainty has never been so important. To join the leading travel companies already signed up the for the Revenue Management & Pricing in Travel conference see www.eyefortravel.com/rmeurope for more information or contact gina@eyefortravel.com Early bird prices for the expire this Friday 10th October.

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