Optimizing travel and hospitality product offerings and pricing in 2023

In the travel and hospitality (T&H) industry, organizations need to constantly adjust the products that they offer and the prices that they charge. Optimizing a product pricing strategy for T&H companies is critical to their ability to provide value for guests and travelers and maximize profitability.

Using Product Offerings & Pricing solutions on Amazon Web Services (AWS), companies can increase personalization and adjust pricing and product offerings based on analysis of customer data. Businesses can also increase sales and profit margins while maintaining customer satisfaction. In fact, T&H customers have historically realized significant improvement in incremental revenue that flows to the bottom line and a breakeven point on their investment measured in weeks, not years.

Product Offerings & Pricing solutions use AWS and partner capabilities to overcome common obstacles such as limited data, underestimation of change management, and the ability to address tension that can occur between corporate and franchisee/management company stakeholders.

What is driving this product offerings and pricing priority?

T&H companies want to drive margin growth and provide better guidance for product price optimization, including at their company and franchisee and/or management company–owned/operated locations. This is a big challenge for the industry due to competition, price elasticity, increasing pricing visibility in the marketplace, increased competition, rising costs (labor, raw materials) and the macro- and microeconomic factors affecting each individual outlet. Building the analytical platform and employing the necessary data science talent have left a fragmented, decentralized approach to pricing—adversely affecting the industry’s ability to maximize revenue capture.

Internal and external growth and margin challenges create the need for new strategic pricing optimization solutions. This is due to factors such as

• varying consumer “willingness to pay” and product preference by locations;
• increasing competitive intensity;
• rising wages, regulatory environments, and labor pressures;
• acceleration of alternative delivery and distribution channels (such as delivery versus dining in, or direct versus aggregator booking);
• increasing pricing visibility in the marketplace;
• fluctuations in customer demand;
• tensions between corporate and franchisee/management company objectives;
• need to bring together data to drive recommendations to address pricing challenges; and
• underestimating the required level of stakeholder and change management.

How can T&H customers benefit?

Travel companies (such as airlines, ground transportation, and travel sellers) and hospitality companies (such as restaurants, catering and foodservice, accommodation and lodging providers, cruise lines, casinos, and leisure services) of all sizes and industry segments stand to benefit from optimizing their product offerings and pricing to improve the bottom line. Pricing optimization has the ability to rapidly deliver incremental revenue and better margin results to improve the bottom line of any travel or hospitality owner or operator, tailored to any location. Primary benefits include the following:

• Grow margin: receive better price recommendations to grow your margins, and understand impact on sales and customers.
• Protect transaction count: get more insightful data-driven analysis on transaction volumes.
• Optimized pricing: pricing recommendations specific to location and purchase/distribution channel.
• Marketplace intelligence: access to local competitor price overviews and pricing data.
• Precise results: performance reporting specific to location-level operation, including price changes to further optimize recommendations.

AWS off-the-shelf partner solutions are also ready to implement, so T&H companies don’t have to build a new in-house capability to optimize their product offerings and pricing tools. This facilitates speed to launch and time to value.

What should T&H companies consider?

Marketing, revenue, product, and customer-focused leaders at T&H companies should evaluate their current product and pricing capabilities and how they can further improve. Consider questions such as the following:

• What are your strategies to increase location-level sales and gross profit margin?
• How do you make sure that your strategies around pricing and positioning deliver value for both your customers and owners/operators?
• How do you make sure that you have maximized the individual location contribution margins to the overall company’s bottom line?
• What metrics do you include to evaluate pricing accuracy currently?
• What business impact do you want your pricing and product strategy to have? How do you measure them?
• What data will you have available to use for building a pricing model?
• How far ahead do you consider your pricing and product offerings?
• At what level do you need to develop pricing and product offerings, considering location-level specificity and franchisee/management company stakeholders?
• How much effort can you put into pricing and product offering refreshes?
• Will your business accept pricing and product offering recommendations as is? Alternatively, will you want to review and adjust them before implementing?

What T&H customers are doing this well?

Ryanair: Ryanair uses AWS to continually price flight extras to sell to customers, providing the right product at the right price to the right customer. Ryanair is also the largest seller of ham and cheese panini in Europe; it uses Amazon SageMaker (which helps build, train, and deploy machine learning models for any use case) and deploys the Panini Predictor to determine what product, and in what quantities, to bring on board so that each customer has the desired fresh food during flight. Ryanair also optimizes its flight schedules using AWS and can schedule 20,000 crew members and 2,500 flights in 37 countries in less than 24 hours versus the 6 weeks originally required.

Air Canada: Air Canada uses AWS Product Offerings & Pricing solutions to better offer products at prices that its loyalty customers will love. When Air Canada reacquired its Aeroplan loyalty program, it used AWS to better understand the customer, own the engagement, enhance sales, payment forms, and integrate with partners for ancillary sales.

Aer Lingus: Aer Lingus works alongside Datalex Ltd (Datalex), an AWS Competency Partner, to implement an artificial intelligence-based Dynamic Pricing solution. Using the Datalex Dynamic product built on AWS, Aer Lingus runs a real-time intelligent pricing solution that flexibly adapts to fluctuating customer and marketplace demands.

How can you get started with Product Offerings & Pricing on AWS?

Improving their product offerings and pricing through AWS helps T&H companies future proof their businesses by maximizing revenue capture, improving the bottom line, and offering products that customers love.

Product Offerings & Pricing solutions for T&H from AWS are curated for the industry, and they include

• AWS services such as
  • Amazon Relational Database Service (Amazon RDS) for MySQL, which makes it easy to set up, operate, and scale MySQL deployments in the cloud;
  • Amazon Simple Storage Service (Amazon S3), object storage built to retrieve any amount of data from anywhere;
  • Amazon Elastic Block Store (Amazon EBS), an easy-to-use, scalable, high-performance block-storage service;
  • Amazon Elastic Compute Cloud (Amazon EC2), which offers secure and resizable compute capacity for virtually any workload;
  • AWS Lambda, a serverless, event-driven compute service;
  • AWS CloudTrail, which monitors and records account activity across AWS infrastructure;
  • AWS Key Management Service (AWS KMS), which helps create and control keys used to encrypt or digitally sign data;
  • AWS Identity and Access Management (AWS IAM), which securely manages identities and access to AWS services and resources;
• AWS Travel and Hospitality Competency Partners such as IBS Software, OpenJaw, Datalex, and Deloitte; and
• a library of industry-specific reference architectures and implementation guidance to show what’s possible.

Contact us to get started.