Revenue Management on RMS Titanic
The core frameworks of airline pricing & revenue management are older than you think
One hundred and eleven years ago today the grand liner Titanic was steaming across the Atlantic on her maiden voyage. She had left Southampton at noon on Wed-10-April, suffering a near collision with the liner New York which delayed her arrival at the French port of Cherbourg by several hours.
After picking up the continental origin traffic, Titanic made her final call the next day at Queenstown in Ireland, now Cobh. She passed Daunt’s Rock Light Vessel, the official start of the transatlantic passage, at 2.20pm GMT and travelled the next 1,807 miles at an average speed of 21.44 knots.
We have all heard the tragic story of Titanic. She struck an iceberg at 11:40pm ship’s time on Sun-14-April and sank two hours and 40 minutes later with the loss of 1,517 lives. Of the 2,223 souls on-board, only 706 survived.
Titanic’s legacy is significant. Mandatory round-the-clock radio communications and a North Atlantic ice patrol help keep mariners safe today. Aviation’s safety culture was established at the dawn of flight not so many years after the disaster.
And Titanic leaves a significant cultural heritage. Something about the story, from the lives of the people on-board to the ship herself and the events of the night to remember captivate the imagination. None of us can know what we would have done in a similar situation.
Part of Titanic’s heritage is the detailed insights about her that have been preserved over the years. This treasure trove of data for the travel historian contains interesting insights into how travel operators generated revenue more than 100 years ago.
Today’s revenue management wonks at airlines reckon they are so smart. High technology powers demand forecasts and airlines hope to turn themselves into retailers with NDC, a communications standard. It turns out that much of what airlines do today was already in place without computers in the days of Titanic. Let’s find out how Titanic’s operator the White Star Line (WSL) put it all together…
Three classes of service
Just like today’s longhaul airlines, WSL offered different products and services to segment the market. The most visible differentiator and a key part of the Titanic story was cabin class.
Titanic’s business model was that of a full service ship, offering all three classes – first, second and third. These do not correspond to first, business and economy in today’s airline marketplace. The rough cabin mapping is probably something like this:
Modern airline first class = Titanic first class deluxe suites
Modern airline business class = Titanic first class standard outside stateroom
Modern airline premium economy = Titanic first class standard inside stateroom
Modern airline economy = Titanic second class
Does not exist today = Titanic third class
Both first and second class offered a comfortable voyage. The decision to travel first or second was not comparable to today’s flyers selecting economy or not economy because the voyage was so much longer.
If you fly anything other than economy today, you would probably have been in first class on Titanic. If you fly economy today and prefer to spend time in a nice hotel rather than a few hours in a bed you would been in first class on Titanic.
Titanic had luxury accommodation…
Titanic was closer in time to the Battle of Trafalgar than today. Modern travellers would not accept what she had to offer most passengers. Bathrooms were shared in first class. Third class offered only two tubs for up to 1,006 passengers.
The biggest suites however were top notch.
Charlotte Cardeza paid £512 6s* for a three room suite with private promenade. Measuring Worth, an inflation calculator, put that as £53,960 in 2021’s money.
It sounds like a lot, but London-based British Airways are charging £10,940.61 a seat for a one-way first class ticket to New York tomorrow. Club is coming in at £8,072.61.
The Cardeza suite had space for four people, two berths in an “Italian Renaissance” style with satinwood panels and another two in the “Bedroom A” design featuring oak panels. The Cardeza ticket also included small rooms for a lady’s maid and gentleman’s valet, plus a snazzy Adams-style lounge with it’s own electric fireplace. So even the most expensive ticket on Titanic was not out of line with today’s prices.
Titanic
4x Cardeza suite B51-53-55 @ £53,960
+ 2x servants £included
TOTAL £53,960 (2021 money)
British Airways
4x First @ £10,940 = £43,760
2x Club World @ £8,070 = £16,144
TOTAL £59,904 (2023 money)
Lucy Martha, Countess of Rothes, paid £86 10s (£9,111 in 2021) to cross in cabin B77, decorated in “Bedroom B” style with oak panels painted white and brass beds. The Countess travelled with Gladys Cherry and her maid Roberta Maioni took B79, a small room next door.
The Countess and her party would have had to pay a small premium to access a private bathroom attached to the suite. Without paying the premium the bathroom would have been kept locked and they would have used standard washing facilities – WSL knew all about ancillary revenue a hundred years before it became an airline thing.
Apart from the suites these rooms were as good as it got in first class on Titanic. Note how £9,111 in today’s money for three people to cross the Atlantic is not out of line with standard first and business class fares.
* Actual ticket prices are taken from Encyclopedia Titanica, 2021 values from measuringworth.com
…but Titanic was not a ship of luxury
Most first class passengers did not luxuriate in such splendour as the Cardezas or the Countess. Cosmo Duff-Gordon paid £39 12s (£4,171) for A16, a window cabin on the top deck. His wife Lucille stayed next door. Lucille’s Secretary Laura Francatelli took E36, a much less desirable cabin (although still with a window) on E deck, the lowest part of the ship where first class rooms could be found.
Lucille and Laura’s ticket cost £56 18s 7d (£5,996). Laura’s cabin E36 would have been £56 18s 7d - £39 12s = £17 6s 7d (£1,825) and had the ship been full Laura would have been expected to share with another lady, even in first class.
Notice the price difference between Laura’s double-berth lower-deck cabin and the upper deck single-berth staterooms occupied by her employers.
Molly Brown, known to history as “The Unsinkable”, most likely occupied a cabin similar to Laura’s – E23 – for which she paid £27 14s 5d (£2,920). Given the price difference over Laura’s ticket, Molly most likely paid a supplement to guarantee solo occupancy.
The Duff-Gordon’s cabins were small but pleasantly furnished, with full panelling, a sofa, an electric fan and lighting. Molly Brown and Lucille Francatelli’s accommodation was somewhat more spartan. Their walls were panelled with whitewashed pine and the ceilings were unpanelled, with iron girders and rivets visible. Electric lightbulbs were unshaded.
Airlines today have many different types of inventory. So did Titanic.
Second class passenger Lawrence Beesley, a teacher, paid £13 (£1,369) for a berth in cabin D56. As it turned out he did not need to share, but had the ship been full he would have been expected to. Unlike the Duff-Gordons he did not have a sea view and his second class bunk would have been significantly narrower than the plush beds up on A deck.
Prices in the summer were slightly higher than in April, the month Titanic sailed. Second class inside rooms like Lawrence’s on D deck would have been sold for £32 for two (£16 each). An outside double was £34 (£17 each). Similar cabins lower down on E and F deck were £2 cheaper**.
Today’s airlines charge extra for window seats and revenue management makes a big thing of seasonality. WSL had exactly the same plans in place for Titanic more than a hundred years ago.
In today’s terms, the Cardezas and the Countess would probably fly to New York in first class. The Duff-Gordons would be in biz with Laura Francatelli in premium. Lawrence Beesley would have flown economy.
Canny self-made Molly Brown and her husband would probably have had the co-brand credit card and 241 voucher, flying in Club or First per availability and almost for free.
** Summer season prices are from a rate sheet published in Titanic: The Ship Magnificent, Volume 2 (page 12)
Catering
For passengers like Lawrence the second class passenger experience would, had the voyage been completed, have been entirely satisfactory. Second class had many of the same facilities as first. Here is a summary
First class lounge = second class library
First class smoking room = second class smoking room
First class dining saloon = second class dining saloon
Lawrence would have found the fare difference between first and second class significant and worthy of consideration even if he could have afforded the more costly cabins. The jump in standards between the two classes was tangible, especially in terms of the public rooms and service standards, but expensive.
First and second class food was prepared in the same galley. Today’s airlines often serve the same meals in first, business and premium economy, with portions getting slightly larger and plates slightly nicer the higher the cabin. Things were much the same on Titanic.
Lunch was typically buffet style, with cold fish and meats, salad and potatoes. First class passengers could order mutton chops from the grill.
At dinner there were many small courses, fitting the fashion at the time. The main choice of meat on Sun-14-Apr was roast lamb with mint sauce, roast duck with apple sauce or roast sirloin of beef with roast potatoes. Peas carrots and other potato choices were served on the side.
Looking at these menus, the food has all the hallmarks of mass produced catering, just like airlines prepare today in their flight kitchens. The food would have been good quality but quite ordinary.
Just as many of today’s flyers can afford business or first but fly economy or premium, first and second class travellers on Titanic would often have had much in common, socially speaking.
Third class was a different matter. Typical passengers paid £7 1s (£742) for a third class berth. Their accommodation was basic. Beds were narrow and cabin dividers did not go all the way to the ceiling. Berths were situated in the lowest part of the ship, right above the propeller shafts. Third class travel would have been loud, crowded and uncomfortable.
You might say the same about economy class today, but even the longest itinerary involves less than 24 hours of flight. Titanic’s trip to New York would have taken a whole week. Incentives to upgrade if you could afford it were much higher than on planes today.
Third class had a smoking room, a general room and an “open space”, all with bench-style seating and no upholstery. Like in first and second class there was a piano, but the ship’s band would not play in these rooms.
The food was more basic and would have taken the cheaper cuts from the same animals served upstairs. Hailing from a culture of fresh and colourful food, quite what the 86 Lebanese travellers in third class made of the roast beef and brown gravy can only be imagined.
Ancillary revenue
WSL built Titanic with ancillary revenue in mind. All public rooms were accompanied with bars to sell the thousands of bottles of beers, wines, spirits, minerals and soft drinks that were loaded at Southampton.
A premium service restaurant separate from the main dining saloon was available to first class passengers. Although no menus and prices for this facility seem to have survived either from Titanic or her sister ship Olympic, it is likely that prices were high.
For many first class passengers, visiting the restaurant would have been a once or twice a voyage special treat.
WSL positioned the restaurant carefully. It was right next to the expensive rooms occupied by Charlotte Cardeza and the Countess of Rothes. Titanic’s very architecture was designed to facilitate ancillary revenue.
The restaurant’s safe was raised from the wreck site in the late 1980s.
Titanic’s famous gymnasium was also positioned carefully. Up on the top deck it was a light and airy space that many passengers would have visited. Once in the gym, they would have been invited to buy tickets to the Turkish baths and swimming pool which were by necessity much lower down in the ship and less likely to pick up passing trade. Once again, Titanic was literally built to generate ancillary revenue.
Cabin flexibility
One of Titanic’s little known design features was that she did not have a fixed capacity in each class of service. 40 cabins on G deck, the lowest, could be sold as either second or third class. These were furnished to second class standards.
On Titanic’s only voyage they were designated third. It is possible that some of the stories about third class passengers being held behind locked gates originate from this space as it was accessed by both second and third class companionways, one of which would have been closed.
Higher up on E deck, cabins like Molly Brown’s and Laura Francatelli’s were designated “first class alternative second, counted as first”. This meant that they were furnished to first class standards but may have been used as either first or second class, according to need.
Further aft were cabins designated “second class alternative first, counted as second”, furnished as second and sold as first if necessary.
Using these cabins according to demand was WSL’s way of handling peaks and troughs. E deck was the flexible seating solution (see article) of RMS Titanic.
oliver AT ransonpricing DOT com