St. Moritz is satisfied with dynamic pricing strategy

July 16, 2020
The mountain railways of the Upper Engadine have been offering their guests the dynamic pricing model "Snow Deal" for two years. Guests who buy their ski ticket early benefit from attractive offers. The introduced dynamic pricing has also proven itself in the last winter season 2019/2020. However, the pricing partner Pricenow, with whom the Upper Engadine mountain railways have been implementing the dynamic pricing model since last winter, is new. In this interview, Beno Suter, Head of Finance and Accounting, talks about the experiences and results of the last season with dynamic pricing and gives a look behind the scenes.

Pricenow: Mr Suter, Pricenow has been supporting the Engadin St. Moritz Mountain Pool since last winter season in the implementation of dynamic pricing and data analytics services. For the implementation of the pricing model, Pricenow advises each mountain railway based on its individual starting position and strategic goals.

Beno Suter: It was important for us that our company and our pricing model were considered individually and that we did not try to sell a one-size-fits-all model. The understanding of the mountain railway industry and our individual requirements for pricing is a jumping off point for us:One quickly recognises in the cooperation with Pricenow that they have a comprehensive market understanding of the industry and that the pricing model was developed for the mountain railway industry. Pricenow responds individually to customer needs and the exchange is open, direct and uncomplicated. The implementation with Pricenow was fun and the results we now find reflect the knowledge and skills of the Pricenow team.

«Through a dynamic pricing strategy, we can address different customer groups with different willingness to pay.»

Particularly important in the creation of the dynamic pricing model is the data analysis that takes place beforehand. By analysing the historical data, we identify the relevant influencing factors for the purchasing and usage decisions of ski guests. In the Upper Engadine, we also travelled directly to the ski area to conduct data-based market research. Why was this important for you and what key conclusions were you able to draw from it?
We already started implementing Dynamic Pricing in the 2018/19 winter season with another partner. At that time, only our historical data was analysed and we had not conducted any market research. The dynamic pricing model in the Upper Engadine also attracted a lot of attention in the media, partly because of the day ticket price we set. We wanted to find out comprehensively and statistically with a professional partner how the new price structure is received by the guests and if there is potential for optimisation. With the market research, we were able to generate direct feedback from our guests.

Two different customer segments emerge from the results of the market research: Multi-day ticket and day ticket guests. We can ideally implement this differentiation based on different pricing models for these ticket types in the Pricenow model. Dynamic pricing therefore creates an exciting price differentiation and allows us to address different customer groups with different willingness to pay. Certain people have a high willingness to pay, while others tend to have a low willingness to pay. Some, especially families, appreciate early booking advantages and actively make use of them. Others want to retain the freedom of a spontaneous booking and are prepared to pay a higher price for it. Our customers are very heterogeneous and static pricing cannot do justice to this.

A major milestone in the joint implementation phase was the development of a fully automated interface for price entry into the Axess POS system. For several months, we worked together with you and Axess on a solution that is completely new to the industry. This was also a courageous step for you, which certainly brought with it some challenges?
When we made the strategic decision, it was clear to us that we wanted an automated solution. In the first year, this was not yet fully possible, but with Pricenow we were able to implement this technically the past, second season. We needed courage, perseverance and persuasion to create an automated interface. Pricenow was the first company to work out an interface that feeds the prices into the Axess cash register systems. This was an innovation that did not exist before - and accordingly took a lot of time. But we are convinced that this is a win-win-win situation for all partners, which offers enormous added value!

«The positive expectations were exceeded: 15% of the day tickets and even 70% of the multi-day tickets have already been booked in advance.»

The winter season, which started so optimistically, unfortunately had to end rather abruptly this year due to the COVID 19 situation. How did you experience the season until mid-March and did your expectations of results in the cooperation with Pricenow come true? What conclusion can you draw now with the current Corona situation?
The advance sale of ski tickets was very pleasing. Many of our guests took advantage of the early booking benefits and secured their ski pass well in advance. The positive expectations were even exceeded. 15% of the day tickets and even 70% of the multi-day tickets have already been booked in advance. This gives the guest a good feeling of having bought the ticket ahead of time and at an attractive price, and gives us improved planning security regardless of the weather situation on the ski day itself.

The external factors were also fitting last year: we had snow early and the weather showed its beautiful side on the most important days. The Corona situation hit us hard as a company. We would still have had perhaps the most beautiful time on the slopes with the best weather conditions ahead of us. In the end, however, we got off lightly because of the timing compared to other destinations that have their main business in spring. The season up to mid-March was very satisfactory and we could have had an excellent winter season if the season had progressed normally. We can attribute the promising figures not only to the good external conditions but also to our pricing strategy. Through dynamic pricing, we were able to motivate guests to book early, increase the average ski pass duration and achieve or even exceed the economic targets in some areas.

Besides the positive sales increases, were there other goals that you pursued through the introduction of the new dynamic pricing model and how were they achieved?
One of our strategic goals is to increase the number of skiers throughout the destination. This season we could see that the ski days increased more than the overnight stays in the valley. This could be an indicator that the share of ski guests is positively influenced by the pricing strategy. Through upselling incentives in pricing, we achieve, for example, that guests ski one day longer with us than in previous years - the results confirm this success. Increasing the online share of ticket purchases was another goal we had set ourselves. We were able to achieve this through early bookings. The increase in advance sales was therefore also successfully realised.

«Only every third 6-day ticket is bought on site at the cash desk.»

Due to the already second winter season with dynamic prices, your guests have changed their purchasing behaviour of ski tickets significantly: Customers now book their tickets up to 300 days in advance. What changes do you notice particularly strongly in this context and what effect does this have for you?
The attractive early booking conditions are a strong incentive for customers to buy their ski tickets online early. By purchasing tickets in advance and online, we have improved planning reliability and can optimally plan our personnel resources. It also reduces the crowds at the ticket offices and shortens waiting times - which ultimately benefits our guests. For example, only every third 6-day ticket is bought at the cash desk. In addition, tickets bought in advance at reduced rates are not dependent on the weather - one of the biggest risks in a destination where there are many alternative activities in addition to skiing.

Due to the increased early booking behaviour, it is even more important that the realised customer demand is included in the price calculation on a daily basis. The Pricenow Pricing Engine automatically incorporates demand into its price calculation on a daily basis across all sales channels. But there is also the possibility for the mountain railway to overwrite the prices in our "Pricing Dashboard" itself in order to react to market conditions on site in the best possible way. How do you use this option and which functions in the Pricing Dashboard are particularly relevant for you?
In the initial phase with a dynamic pricing model, it is extremely important to build understanding and trust. As a rule, an automatic algorithm decides better than a human. The Pricenow "Pricing Dashboard" shows in an understandable way which mechanisms influence prices in the background. In this way, the responsible employees and management can easily understand how prices change and the trust in the system increases significantly. If, in exceptional cases, humans want to intervene "against" the algorithm, we can also manually overwrite the prices if necessary. This is especially the case if we have the feeling that the conditions on the ground change unexpectedly. It is important for us to be able to make adjustments during the season if necessary and that we have the possibility to react at any time. However, we want to learn as much as possible with the Pricing Dashboard and intervene as little as possible, as this is an automated process.

Speaking of tools, you also use our data analysis tool, the Business Intelligence Tool. This tool delivers important key figures and comprehensive insights into price and turnover development on a daily basis. What decisions can you make based on the data analysis?
With the BI tool, we can query the figures in real time and on a daily basis and see how prices are changing. This allows us to analyse whether the price strategy we defined together has proven successful. It serves us as a controlling instrument for our defined measures and so we can also further adjust the price strategy if necessary.

Based on the comprehensive data analyses, the pricing model will also be continuously optimised for the coming winter season. What goals would you like to set for the next winter and what insights would you like to explore in more depth?
This season, we have already achieved very many of our set goals. We will certainly improve the pricing model on the basis of the data generated. We would like to maintain the positive developments we have generated this season with continuous further development of our products.We assume that the market will develop again next season, also due to the Corona situation. We will observe the developments and take them up for the benefit of our guests and our company. With our cooperation with Pricenow, we have the right partner and the tools to do so.

Thank you Beno Suter for the detailed interview!

Pictures: © Engadin Mountains

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