East Coast Mainline, the UK rail operator that the government took back from National Express in November 2009, has increased revenue by 1% after upgrading its revenue management technology to get a more profitable mix of sales.
The new price-sensitive revenue management system, supplied by software supplier JDA, helps price seats by analysing demand on up to 136 high-speed trains a day. The system also compares its prices against competitors' fares, including budget airlines and other rail operators, generating over one million forecasts each night.
Revenue has increased by 0.9% during the first three months of using the system, according to Suzanne Donnelly, head of revenue at East Coast Trains. She anticipates further gains as the quality of data forecasts improves.
East Coast carries 18 million people a year between London and major cities in the north of England and Scotland. Donnelly said the recession has changed traffic patterns, with a growing number of travellers switching to off-peak services, attracted by cheaper fares.
"During the recession, East Coast has seen business travellers trading down into cheaper seats by opting for more restrictive tickets and booking further ahead," she said. "Promotional fares and special offers have also encouraged an increasing number of leisure travellers."
Advance purchase tickets now account for around £180m of the company's £500m annual turnover. Donnelly said this was the key category for revenue management, with revenue yield per seat a key performance indicator.
Donnelly said that since rail companies had been franchised, there was a greater focus and drive for profitability. Revenue management tools are a good way to make more money, she said. "Around three-quarters of passengers book in advance, and by analysing data we can monitor and understand their behaviour."
Since an empty seat is money lost, it is important to get the forecast right. "The same train, running on the same day, can vary enormously from one week to another in terms of revenues, so a lot of trains have to be analysed for accurate forecasting," said Donnelly.
East Coast ran the old and new forecasting systems in parallel to measure their reliability for the same trains. According to Donnelly, the new system has improved forecasting by 17%.
She is now aiming for a 1.5% increase in revenues for 2010, and for the system to pay for itself in 18 months.
International rail operators Eurostar and iDTGV, part of French group SNCF, use the same JDA software.