Wardour Street
Sep. 12th, 2007 08:56 am![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
peterbirksIt's been some time since the update on the food situation in Wardour Street.
Contrary to many expectations, the Hummmus Bar - theoretically located in the restaurant of death — has been quite a success. I wonder if this might in part be to Mezzo no longer being Mezzo. Its "name" is gone and the place is now just another restaurant. Hummus, meanwhile, has the brand. The upstart wins.
No such luck at our old favourite, 139 Wardour Street, which is "closed for refurbishment", long-term, again. The location, opposite Busaba Eathai, is great, but the shape of the space inside is currently all wrong. Unfortunately, most restarateurs don't come in equipped with the capital for major structural renovation. Hence the four owners in five years.
The old Goth pub, the Interpid Fox, remains boarded up. This really is a travesty. The pub was always busy, was highly popular, and some cunt owners just moved in and shut it down, gutting it and doing nothing with it. When they eventually do do something with it, the place will doubtless be a Spiga/Slug & Lettuce-like clone - as if we don't have enough of those already.
When the Movie Cafe closed down it became an Olly Olsen, and lasted all of six months. It's now shut again. Another example, without doubt, of racked up rental charges/leases making it uneconomic to run most types of food outlet. Commercial landlords are universally moronic, because even the dumbest landlord should know that a few months' "dead time" takes forever to make up in slightly higher rents. 100% occupancy is what matters.
Airlines know this, but then screw up by assuming that customers are morons. So they go for high prices and then low prices, or vice-versa. This causes two people sitting next to each other often to have paid vastly different prices. If you aren't clever enough to set the right price in the first place, then you should be doing another job. Slashing prices at the last minute to put bums on seats might work in the short term, but in the long term it causes customers to wait before they buy, until you are once again forced to slash the prices to put bums on seats, but this time you have to fill more seats, because the shrewder customers have "held off".
Can no airline work this out?
Contrary to many expectations, the Hummmus Bar - theoretically located in the restaurant of death — has been quite a success. I wonder if this might in part be to Mezzo no longer being Mezzo. Its "name" is gone and the place is now just another restaurant. Hummus, meanwhile, has the brand. The upstart wins.
No such luck at our old favourite, 139 Wardour Street, which is "closed for refurbishment", long-term, again. The location, opposite Busaba Eathai, is great, but the shape of the space inside is currently all wrong. Unfortunately, most restarateurs don't come in equipped with the capital for major structural renovation. Hence the four owners in five years.
The old Goth pub, the Interpid Fox, remains boarded up. This really is a travesty. The pub was always busy, was highly popular, and some cunt owners just moved in and shut it down, gutting it and doing nothing with it. When they eventually do do something with it, the place will doubtless be a Spiga/Slug & Lettuce-like clone - as if we don't have enough of those already.
When the Movie Cafe closed down it became an Olly Olsen, and lasted all of six months. It's now shut again. Another example, without doubt, of racked up rental charges/leases making it uneconomic to run most types of food outlet. Commercial landlords are universally moronic, because even the dumbest landlord should know that a few months' "dead time" takes forever to make up in slightly higher rents. 100% occupancy is what matters.
Airlines know this, but then screw up by assuming that customers are morons. So they go for high prices and then low prices, or vice-versa. This causes two people sitting next to each other often to have paid vastly different prices. If you aren't clever enough to set the right price in the first place, then you should be doing another job. Slashing prices at the last minute to put bums on seats might work in the short term, but in the long term it causes customers to wait before they buy, until you are once again forced to slash the prices to put bums on seats, but this time you have to fill more seats, because the shrewder customers have "held off".
Can no airline work this out?
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no subject
Date: 2007-09-12 08:31 am (UTC)Isn't the Ryanair pricing model such that prices go up as seats are sold, reflecting the increasing scarcity? I thought so - in which case the contrast between them and the old-school airlines is fascinating.
no subject
Date: 2007-09-12 01:08 pm (UTC)Last-minute travellers are either "must travel now" customers or "I could travel tomorrow, but I have no concept of delayed gratificiation" kind of travellers. Both would pay more for a seat on a particular flight than would someone selecting a flight two months in advance, when a day here or there probably won't make a difference. So, even if the flight were empty, RyanAir could probably charge more. It's a time factor (there's a much bigger difference between tomorrow and the day after than there is between Tuesday a month hence and Wednesday a month hence) rather than a scarcity factor.
In addition, you get the experienced customer into a mode that realises that prices are not going to get cheaper as the airline desperately tries to fill up the plane. So you are "incented" (I heard an American politician use this word in testimony to a House Committee last week) to buy your ticket early.
PJ
Demand Chain Management
Date: 2007-09-12 10:15 pm (UTC)So interesting that the company I work for (producing software to manage the aforesaid chain) turns over tens of millions a year; largely for tour operators, but also for airlines and, would you believe, railway companies. Helloooo, Beardie.
(The irony is that it makes absolutely no difference whatsoever to the obscene amount of money I have to pay to get to somewhere I have absolutely no intention of staying in, ie Bracknell.)
The peculiar thing about this is that the demand chain works both ways. The software I'm dealing with handles predicted up-take: if, given all the various constraints and variables based upon past performance, your tour operator decides that they're 10% off the curve, then they drop the price. How much they drop it depends, of course, on a number of fixed costs and a fine judgement on desperation. (It doesn't seem to depend upon making the Wall Street target for the quarter, interestingly enough.)
RyanAir, of course, goes the other way. As far as I can make out, it is very definitely not for "the wrong reasons;" it's done to fit their business model.
Air travel is constrained in two ways:
(1) Running a single plane is bloody expensive. You want it on the ground for the shortest possible time. Partly as a consequence, you want it at the right place at the right time, otherwise financial meltdown ensues (particularly on "budget" airlines).
(2) Depending largely upon fixed costs, you are very, very interested in yield management. It's Micawberish. Sell less than 70% of the seats: result -- misery. Sell more than 70%: result -- happiness. (Your mileage, percentage, and results may vary.)
The thing is, these two business drivers tend to go in opposite directions. It's quite feasible to sell a planeload of seats at a quid a pop, as long as the bloody thing hits its Heathrow (or even Stansted) slot on time. It's also quite feasible to hit your 70% mark and just make a wild guess at how much the market will bear. It's pure profit, baby.
If you've ever tried to book a flight back to anywhere in Britain from Stockholm at short notice, you will have seen point (2) in all its red-fanged glory. Christ, I would have taken Aberdeen for three figures. But no, this is where the invisible cartel (and it really is invisible, and not in legal terms a cartel, on the market principle that everybody knows that everybody else is going to do the same thing) kicks in. Basically, if the three or four airlines involved are happy with their 70% break-even, then you can kiss goodbye to your chances of a ticket that doesn't make your nose bleed even before you've left the ground.
There's probably a board game in this somewhere, but I'm too burned to design it.
I still think that the maths involved in the Operational Research behind all this is bollocks, though.
Re: Demand Chain Management
Date: 2007-09-13 09:42 am (UTC)You wrote that:
"if, given all the various constraints and variables based upon past performance, your tour operator decides that they're 10% off the curve, then they drop the price".
I think that this is a fundamental error on the part of the tour operator/airline.
A comparison I was going to use wa that of newspaper production in the 1950s. The print workers spotted that, because nothing is as worthless as yesterday's newspaper, "wildcat" strikes could gain remarkable concessions. Until, by the end of it, anyone "in the print" worked about two days a fortnight and earned more than the editor.
Similarly, if you drop the price, you might fill your seats for that flight, but it assumes a certain level of Alzheimer's on the part of the buyer. Because the next time, when you set your prices based on the previous experience, the scenario has changed, because the buyers now know that, if they hang back, you will drop the price. Net result, even greater misery than if you had stuck by your initial pricing in the first place and swallowed the loss for that particular flight.
However, I decided that there was a better comparison, and that's what I have written about in today's post...
PJ