Britain’s rail industry is on the brink of significant change. As Great British Railways begins to take shape and the Government looks to reduce the cost of running the network while encouraging more people to travel by train, attention is turning to one area that has the potential to deliver benefits for both operators and passengers: revenue management.
Although often associated simply with ticket pricing, revenue management is far more sophisticated. At its heart, it is about understanding demand, forecasting how passengers will travel and ensuring the right fares are available at the right time. Advances in computing power and artificial intelligence mean today’s systems can make far more accurate predictions than ever before, helping operators maximise revenue while making better use of existing capacity.
Eric Nordling, General Manager of Expretio, believes the industry has reached a tipping point.
Eric Nordling, General Manager at Expretio, said:For years we've understood the principles of revenue management, but the technology has finally caught up with the challenge. We can now analyse vastly more data, use hundreds of forecasting models and understand passenger demand with a level of accuracy that simply wasn't possible a decade or two ago.
That capability matters because rail presents one of the most complex pricing challenges in public transport.
Unlike aviation, where a flight might serve a limited number of onward connections, a single intercity train can accommodate hundreds of possible journey combinations. Every passenger travelling between different stations competes for the same pool of seats, making pricing decisions far more complicated than simply filling empty capacity.
Eric Nordling, General Manager at Expretio, said:People often think rail should be easier than aviation, but in many ways it's the opposite. One train can create more than 800 possible itineraries. Understanding demand for every one of those journeys is an enormous forecasting challenge.
Solving that puzzle is not simply a technical exercise for the back office, Nordling argues. Get it right, and the gains flow in two directions at once.
Eric Nordling, General Manager at Expretio, said:Every seat that goes empty on a train that's already run is revenue nobody can ever recover. But fill that same seat with a well-judged discount instead of leaving it empty, and you've grown ridership and revenue in a single move. That's the opportunity sitting inside better revenue management – it's not just about extracting more from passengers who were travelling anyway.
That combination – more passengers and more revenue, rather than one at the expense of the other – is precisely what the UK government is looking for as it reshapes the network under Great British Railways. Ministers have been clear that reform needs to reduce the taxpayer’s contribution to running the railway without cutting services or pricing people off trains altogether.
Eric Nordling, General Manager at Expretio, said:You can't close that subsidy gap by making the railway worse for passengers. The only sustainable way to do it is to get more value out of the capacity that already exists – and that is exactly what revenue management is built to do.
For Nordling, that is what makes the current moment different from previous attempts at rail reform. The technology to forecast demand accurately across a genuinely complex network now exists and is already running on parts of the UK railway. What has been missing, he believes, is industry-wide recognition that revenue management deserves a central role in that reform, rather than being treated as a back-office function to be addressed once the bigger structural questions have been settled.
Eric Nordling, General Manager at Expretio, said:The structural changes GBR brings will matter. But if revenue management isn't part of that conversation from the start, the industry will be leaving one of its most powerful tools for reducing subsidy and growing ridership sitting on the shelf.
This article was originally published by Expretio.
