Thomson Holidays automates online pricing adjustments

Thomson Holidays, the UK's biggest tour operator, is maximising the revenue it gets from its combination of aircraft seats and hotel beds with an automated pricing system.

Alan Sugarman, the firm's general manager of operations research, said changes in the travel industry over the past five years have put enormous pressure on profit margins. People now want fewer packaged holidays, more mix and match combinations of when they want to travel, what transport they want to use and which destination and accommodation they take. Customers also want better prices which are available through on-line bookings, he said.

Thomson's website now attracts more than one million visitors a week and the company takes almost 40% percent of its sales online. Following its merger with First Choice Holidays, the company, now called Tui Travel, will send 7.5 million people on holiday to more than 80 destinations, using more than 80 aircraft and a network of almost 1,000 travel shops.

There are so many holiday pricing variables that Tui Travel has resorted to automation. It developed the automated pricing system over the past four years with the help of retail software house JDA, which has now commercialised it as a product for all tour operators. Airlines were the first to develop this type of system, but this is the first to combine travel and sleeping arrangements, Sugarman said.

"The application can adjust the prices of holidays to ensure that it uses all available flight and hotel capacity, " he said. "It takes the demand forecast, available capacity and incremental costs of sale to adjust the offered price for maximum profit."

The company can automatically increase prices where there is high demand, or drop prices where there is low demand.

Tui Travel now makes between 50,000 and 100,000 price change recommendations a day in response to travellers' demands. "Almost 90% are accepted without human intervention," he said.

Tui Travel is running the package on Fujitsu hardware under the Solaris operating system, with an Oracle database.

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