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 todays 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 todays largest and most profitable global companies are leveraging JDAs solutions for passenger rail to take their businesses to the next level. JDAs 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. JDAs 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

Focuses on occasions when demand outstrips supply Assumes demand is what it is Increases profits by yielding out the least desirable business Manages product availability through inventory Uses competitor price data to evaluate revenue management decisions

JDA Price Sensitive Revenue Management

Makes pricing decisions that optimize the entire network at all times Understands that demand can change depending on what price is charged Uses price to improve market share from competitor sets Manages prices directly Pulls competitor data into the heart of forecasting and pricing processes

JDAs 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 Managements 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:

Significantly improved demand forecasts, providing a more accurate view of future demand for all services and markets Optimal price setting for all train departures until the day of departure, based on price-sensitive demand forecasts 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

Understanding Passenger Demand

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. 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

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 JDAs solution allows us to do is achieve greater profits. With three quarters of passengers booking in advance, were 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

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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08.08.11