Excerpt from Boston Consulting Group
The COVID-19 crisis quickly brought the travel and tourism industry to a virtual standstill, as steep drops in demand forced unprecedented capacity adjustments by airlines, cruise lines, hotels, railways, car rental companies, and tour operators. But when the inevitable recovery comes - perhaps in months, although it may take longer - this industry will confront a problem that few have ever faced: setting prices and generating revenue from scratch.
The crisis has rendered meaningless the typical reference points—including historical booking patterns and trends—that drive price optimization. This drastic change has essentially turned companies’ revenue management (RM) systems into blank slates. In addition, markets will probably be fundamentally reshaped in the aftermath of the pandemic. For an extended period, travel demand will be lower than precrisis levels, and travel patterns are likely to be very different.
Companies that move the fastest and remain the most flexible in understanding and adapting to these new conditions have the potential to gain significant market share and secure their positions. Amidst the high levels of uncertainty and volatility, travel and tourism companies need to manage pricing and customer relationships in the short term, while retuning their RM systems to optimize revenues for the economic recovery.
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