Travel: pricing optimization to compete in the new normal


As it was easy to assume, the performance of the tourism sector in 2020 was deeply negative. The data shared by the Bank of Italy about the total number of travellers, with and without overnight stays, for the first two quarters of 2020 compared to 2019, show a delta of -81%. While, 2019, recorded an average increase of +10% compared to the previous year. (Source:

The spread of Covid-19, the restrictive measures implemented by individual governments, the general lockdown, and the ban on travel between regions and abroad are elements that have inevitably had a strong impact on the travel world.  Some subjects and destinations have suffered more than others the absence of the foreign tourists, while other specific sectors such as the cruise industry and MICE (Meetings, Incentives, Conferences, and Exhibitions), have had more difficulty in rethinking their offer and adapting it to the new scenario.

Certainly, on an overall level, the need to be dynamic and resilient has emerged in a predominant way. Those who were able to adopt a reactive and innovative approach achieved results above the average of the period.

As demonstrated by some virtuous cases, a fundamental lever to implement this new and necessary approach has been the pricing.

Price optimization has been a key step to be able to effectively intercept a demand that has profoundly changed its behaviour and needs in this new 2020 scenario.

Starting from data to respond to the new normal

The starting point must be to analyze historical sales data, know it, and be able to identify its salient features. From these insights, the next step is to assess and define how it has changed in 2020. Therefore, based on new needs, new requirements, and a spending capacity, which can be assumed to be reduced compared to the previous year, it is important to redefine one’s pricing strategy and communication strategy.

Price elasticity is an indicator capable of summing up this propensity to purchase and to guide pricing choices, an economic measure that enables to estimate consumers’ sensitivity to the price of the good or service in question.

It’s correct to assume a general reduction in spending capacity, which has led some potential consumers not to make the purchase by reducing the overall volume of demand. In this case, we are talking about a strong stiffening of the individual demand curve and a negative elasticity, in which price variations have no impact on consumption. If the totality of the individual demand curves had had these characteristics there would have been no tourist movements.

In spite of the fact that for 2020 we are talking about considerably limited volumes, fortunately, the real world has deviated from the theoretical one and it is possible to split it into two macro-segments. The first one is represented by those who have purchased a tourism product thanks to the public subsidy of the “Bonus Vacanze”.

The second, perhaps the most consistent and interesting, is represented by those customers who have revealed a greater willingness to pay for tourist services able to ensure some extra services in terms of sanitation and compliance with anti Covid-19 regulations. These subjects are the ones that represented the actual demand in 2020 and that had to be intercepted.

New offers based on safety

The smartest players have been able to intercept this demand segment with adequate pricing and offers built ad hoc according to new needs. The 2020 tourists were looking for protection and reassurance and were willing to spend money to ensure a safe experience. In these cases, demand was not very elastic with respect to price, and offering their product at the optimum price was decisive in boosting business. For example, one of the most effective solutions observed in the case of some tour operating groups was to start with their core product and rethink it in a bundle that included extra services aimed at giving the customer greater security.

Therefore, analyzing one’s own data and getting to know one’s clients are no longer sufficient elements to set up a winning business strategy. It becomes necessary to have indicators and clear highlights that make it possible, on the one hand, to measure the sensitivity of potential clients and their propensity to buy and, on the other, to give more information on new needs in order to define a correct business strategy.

The importance of using data to drive travel operator’s choices will be at the centre of Massimo Dell’Erba, CTO of Premoneo, during Hicon, the online event dedicated to innovation and technologies applied to tourism and hospitality. The meeting The data is drawn. AI Data-driven to emerge in the new normal is scheduled for Thursday 3 December at 2 pm. 

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