Facing a pandemia or a virus, how should I position my pricing?

Emmanuel Scuto
February 24, 2020
How will this new exogenous factor impact the demand? How to stimulate the travel demand to avoid too much reduction? Can it be stimulated by promotion or price reduction?

There is no doubt that coronavirus, now known as Covid19, will hit the demand for travel in general and car rental in particular. Forwardkeys has already measured in its last article a significant reduction of inbound and outbound Chinese passengers but also a slight decrease in overall travel.

How will this new exogenous factor impact the demand? How to stimulate the travel demand to avoid too much reduction? Can it be stimulated by promotion or price reduction?

Time to stay calm and analyze your data

The rate shop analyzer web apps provided by WeYield give Revenue Managers a quick overview of the market pricing. Using our Pricing Pace report (our newest released module) it is possible to see how the prices have changed for a given departure date over the previous surveys conducted. It is quick and easy to analyze which company has triggered a price reduction.

What pricing actions should I take during these difficult times?

Firstly, do not over-react. Step back, analyze and evaluate the best scenario. Do not drop the prices.

For two reasons:

  1. For the travelers who have booked during this period, they may try whatever it is possible to cancel their trip or holidays or eventually postpone them. But if the booking conditions attached to the travel do not allow them to cancel, they will come anyway. But for sure, no price reduction will ever generate some extra demand during this stressful period. People who requested to stay at home will not rent a car because it is cheaper by -20%
  2. for the others who have no other options than traveling, they will fly anyway. And any price reduction will be taken as money-saving from their side but as revenue spoilage from the rental operator side.

Thus, it is not the time to over-react. Just leave the competitors dropping their price: they will simply not generate any more volume but dilute the small money they will get out of a potential rental.

Fear is always a bad advisor

Eventually, I could consider trying to raise prices. For the one for whom canceling the trip is not an option, a price increase will compensate a little bit for the volume reduction. It may be a bit too extreme but why not!

How to use WeYield apps to track demand shift?

WeYield apps provide instant monitoring graphs to track any shift in demand. So take enough time to analyze data. Gut feeling is good may trends monitoring is better to avoid misinterpretation. If your trends are in line with last year's same period or in line with your expectations, do not touch your prices.

First, use the ‘New bookings’ report and select the period of pick-up you want to analyze. If the bold line is above the dotted line, this means that your reservation pick-up is still faster than last year at the same time

Second, if you identify a particular departure date or period going down or at risk in terms of extra demand, use the Demand ‘Booking pace’ report to identify if the demand is really shifting, by how much and since when.

Pay attention to your key performance indicators, set your alerts to get automatically informed whenever an indicator changes.

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Emmanuel Scuto
February 24, 2020

Expert in Revenue Management and Pricing in the Car Rental industry for 20 years, I aim to share my optimization experience with our customers throughout the world. I am specialized in revenue maximization, pricing strategy, yield management, reporting based on AI.

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