Passenger Rail
Balancing Supply and Demand to
Drive Profit and Service Levels
Optimize capacity and
price to improve business
performance with JDA
Price Sensitive Revenue
Management solutions
Challenge: Optimizing Capacity and Balancing
Supply and Demand The high-speed passenger rail sector has become increasingly
vital to the economic and environmental future of industrialized
nations worldwide. With the promise of such significant benefits
as faster, more efficient mobility, significant energy savings and
reduced environmental damage, countries around the world are
continuing to invest in, extend and maintain their high-speed
rail systems.
Efficient Use of Capacity
These rail operators are investing in new, faster trains, with
increased capacity in the form of additional carriages or
double-decker trains to provide improved service. However,
increased capacity to address high-demand peak travel times
magnifies the effect of off-peak trains carrying fewer passengers
per carriage and can add extra costs without an increase in
revenues.
Environmentally friendly and sustainable green transportation,
high-speed trains are significantly more energy efficient than
airplanes and even automobiles. However, in order to decrease
pollutants and green house gas emissions, available capacity
must be used as efficiently as possible since an off-peak train
with a low-load factor generates more carbon emissions per
passenger than a full airplane. Thus, optimizing capacity at all
times is a critical rail operator objective.
Price and Demand Elasticity
While faster trains are reducing passenger travel time,
heightened airport security measures mean that door-to-door
travel times for airlines are increasing. The result is that the
train now competes strongly with airlines in markets where
journey times are under four and a half hours. Additionally,
as deregulation starts to open up national and international
markets, rail companies are starting to compete with each other
in what used to be captive markets.
Rail companies must also deal with the realities of today’s
market transparency and heightened price competition created
by the Internet and the increasingly price-driven business
landscape. In some markets, business passengers are moving
away from flexible, high-priced tickets into restricted advancepurchase tickets that place increased pressure on yields. Further,
special online promotions and competitive pricing are leading
to higher numbers of price-sensitive passengers seeking and
booking discounted tickets.
To ensure that high-speed passenger rail can deliver on
its potential for improved environmental, economic and
service outcomes, rail operators must be able to respond to
changing market conditions and competitive pricing actions
while also balancing passenger demand with ticket prices
and seat capacity. In order to effectively address these new
industry challenges, rail operators must look beyond their
current revenue management practices and systems to adopt
a more sophisticated approach that brings price elasticity
and competitor data into the heart of revenue management
systems, enabling them to more evenly spread demand across
peak and off-peak travel times.
Solution: JDA Price Sensitive Revenue
Management JDA Pricing & Revenue Management solutions delivers Price
Sensitive Revenue Management capabilities through world-class
demand forecasting, price optimization and inventory/capacity
management solutions. These solutions help rail companies
grow demand and revenue, provide better service and enhance
market share. JDA is an industry leader in Price Sensitive
Revenue Management innovation, and many of today’s largest
and most profitable global companies are leveraging JDA’s
solutions for passenger rail to take their businesses to the
next level.
JDA’s Passenger Rail Pricing & Revenue Management
Innovations:
• 2003: First passenger rail origin and destination optimization
revenue management solution
• 2006: First passenger rail price-sensitive forecasting solution
• 2010: First passenger rail revenue management solution
implemented in Japanese market
• 2011: First implementation of price optimization in
passenger rail
Unlike traditional revenue management methodologies,
JDA Price Sensitive Revenue Management solutions place an
emphasis on optimizing price rather than focusing on inventory
controls alone. JDA’s solutions enable companies to optimize
revenue potential across all customer segments with a welldefined strategy based on price elasticity modeling, accurate
demand forecasting and real-time visibility into competitor
pricing.
Traditional Revenue Management
JDA Price Sensitive Revenue Management
Focuses on occasions when demand outstrips supply
Makes pricing decisions that optimize the entire network at
all times
Assumes demand “is what it is”
Understands that demand can change depending on what
price is charged
Increases profits by yielding out the least desirable
business
Uses price to improve market share from competitor sets
Manages product availability through inventory
Manages prices directly
Uses competitor price data to evaluate revenue
management decisions
Pulls competitor data into the heart of forecasting and
pricing processes
JDA’s Price Sensitive Revenue Management solutions position rail
operators to achieve optimal profitability even while addressing
economic and competitive demands. This dynamic, automated
and flexible approach to pricing and revenue management
combines pricing and yield management into a more costeffective, efficient business process that positions you to:
• Maximize profits and revenue. Through the combination
of automation, demand forecasting, price optimization and
inventory/capacity management, you can gain a competitive
advantage and boost revenue-generating opportunities by
managing revenue in markets without price restrictions.
• Improve forecast accuracy. Advanced forecasting enables
you to analyze how a price increase or decrease will affect
demand. By leveraging robust demand segmentation, you
can adjust forecasting based on current booking patterns,
capacity and inventory.
• Optimize pricing through up-to-date competitive data.
Integrate advanced price elasticity modeling, customer
segmentation and competitive pricing into your core
decision-making process, enabling you to set the right prices
and differentiate customer value in real time across multiple
fare classes and journeys.
• Balance supply and demand through improved visibility.
Using price optimization, you can adjust prices based on
fluctuations in demand on any given day or route, as well as
manage high- and low-demand periods and fare structures.
will help generate the most revenue. Operators can then use
marketing campaigns to stimulate demand at low demand
times, as well as for seasonal activities and special events.
Applying an Optimal Mix of Pricing and Products
Armed with an accurate demand forecast, you can employ
demand steering tactics related to prices and products on sale.
Although price is a primary driver of choice, flexibility is also
important to many rail customers. Such customers are prepared
to weigh trade-offs between price and flexibility by purchasing
more expensive tickets that allow exchanges or refunds.
Operators can use the mix of prices and products on sale to help
control when customers travel.
Understanding the scale and size of both peaks and shoulder
peaks enables rail operators to direct demand to less busy
times and smooth demand at the peak period. With JDA Price
Sensitive Revenue Management’s sophisticated forecasting
technology along with critical data, you can offer attractively
priced products to passengers traveling at both peak and offpeak times to secure the best price and optimal passenger
numbers.
Key JDA Price Sensitive Revenue Management
Benefits:
Understanding Passenger Demand • Significantly improved demand forecasts, providing a more
accurate view of future demand for all services and markets
Demand forecasts must incorporate an understanding
of customers’ willingness to pay. Given increased price
transparency, it is essential to account for price sensitivity since
recommending a change in price will in turn influence demand
for your services. Only price-sensitive demand forecasts can
deliver the level of accuracy required by a price optimizer to
maximize rail companies’ revenues.
• Optimal price setting for all train departures until the day of
departure, based on price-sensitive demand forecasts
By analyzing all available sources and other historical and
competitor data, JDA Price Sensitive Revenue Management
solutions can generate an accurate, unconstrained forecast
that enables you to better manage inventory and make more
informed decisions that will yield profits. You can proactively
identify where high demand is likely to occur and where low
demand exists to make optimal price recommendations that
• Reduced manual overrides and increased number of
automatically routed pricing decisions, enabling analysts to
focus their attention on high-value opportunities rather than
routine tasks
• Appropriate response to competitor pricing actions by
integrating competitive prices
• Understanding of how price changes in second-class cabins
would impact demand in first-class cabins by incorporating
cross-cabin effects
• Ability to model how modifying price on one train could
change demand on another departure by incorporating
cross-train effects
Passenger Rail
About JDA Pricing and Revenue Management Group Why are leading passenger
rail companies using JDA
Price Sensitive Revenue
Management? JDA Pricing and Revenue Management Group, a global business unit within JDA
Software, is a leading provider of Price Sensitive Revenue Management™ solutions that
help companies improve profits by balancing supply and demand through innovative
forecasting, pricing and revenue management. For more than 25 years, companies in
the travel, transportation, hospitality and media industries have benefited from the
ongoing innovation and deep domain expertise from JDA. To learn more about JDA
Pricing and Revenue Management, please visit www.jda.com/revenuemanagement.
“What JDA’s solution allows us
to do is achieve greater profits.
With three quarters of passengers
booking in advance, we’re able to
analyze data, as well as monitor
and understand our customers’
behavior to accurately price
our seats. We have delivered a
3 percent increase in passenger
numbers in the past year and we
are planning for growth. JDA Rail
Price Manager has helped East
Coast deliver against our revenue
targets and we look forward to
continuing success.”
Suzanne Donnelly,
Head of Revenue,
East Coast Main Line
WEB
www.jda.com
EMAIL
[email protected]
Real Results. Fast.
JDA Software can help your company upgrade its traditional revenue management
systems to leverage more sophisticated Price Sensitive Revenue Management capabilities
by following a phased approach that meets your timeline and resources. Here are some
of the real results that our customers have achieved from using JDA Pricing & Revenue
Management solutions*:
• Boosted annual revenue by more than US$7 million
• Improved forecast accuracy by 17 percent
• Improved revenue on leisure trains by up to 20 percent
• Enhanced overall passenger volume by 27 percent
• Helped double the number of daily pricing decisions
• Freed up analyst time to focus on planning and implementing special event details
• Optimized revenue management strategies
• Substantially improved business operations
• Leveraged price as an effective means to gain market share from competitors
• Improved internal communication
* Represents actual results realized by JDA customers.
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Copyright © 2011, JDA Software Group, Inc. All rights reserved. JDA is a Registered Trademark of JDA Software Group, Inc. All other company and product names may be Trademarks, Registered Trademarks
or Service Marks of the companies with which they are associated. JDA reserves the right at any time and without notice to change these materials or any of the functions, features or specifications of
any of the software described herein. JDA shall have no warranty obligation with respect to these materials or the software described herein, except as approved in JDA’s Software License Agreement
with an authorized licensee.
08.08.11