RMS Titanic – Revenue Management System
Let’s see how the White Star Line did revenue management, 1912 style
It’s Titanic week! 112 years ago today the grand liner RMS Titanic was steaming across the North Atlantic heading from Southampton to New York. We all know her tragic destiny.
But imagine if Titanic had not struck the iceberg and continued back-and-forth carrying passengers and cargo, and of course the mails, between the old and new worlds? She would have delivered a lot of revenue for her owners the White Star Line.
Last year (see article) I wrote about what that revenue looked like. I explained how fares in 1912 compared to today’s. I also analysed Titanic’s ability to generate ancillary revenue and additional revenue from cabin flexibility.
Today I am going to present my analysis of Titanic’s first class pricing in more detail. We used to believe that the “RMS” in RMS Titanic stood only for “Royal Mail Ship”. Read on to find out why it could also stand for “Revenue Management System”!
On her first and only voyage, Titanic carried 324 first class passengers travelling on 191 tickets. Unlike with airlines today where every passenger travels on their own ticket, passengers travelled together in 1912.
Five wealthy Ryersons and two of their servants travelled together on ticket 17608 at £262 7s 6d. They occupied three of the famous deluxe staterooms on B-Deck, including the plush B57 & B63, decorated in “New Dutch Style” by fitters HP Mutters & Zoon.
To get to modern money, multiply by 117-ish. Now £30k in today’s cash for the Ryersons and their staff to cross the Atlantic sounds like a great deal of money. But divided by seven we get £4,400 each. Pricey but not out of line for a first class single today.
All together, the White Star Line collected £11,178 from first class ticket sales on Titanic’s maiden voyage. This included staff travel:
J Bruce Ismay, President of the White Star Line, ticket 112058 @ £ZERO
Thomas Andrews & two members of the Harland & Wolff builder’s guarantee group inspecting the vessel, tickets 112050, 112051 & 112052 @ £ZERO
Captain Frans Olof Carlsson, ticket 695 @ £5, arranged by the American Line
It also included a proactive upgrade, Alfred Nourney, ticket 2166 @ £13 7s 3d plus a £38 upgrade fee.
Taking all the fare data online at Encyclopedia Titanica, we can visualise Titanic’s first class achieved demand curve:
Source: Encyclopedia Titanica, Oliver Ranson’s analysis, Alfred Nourney shown at second class fare excluding first class upgrade
The four passengers on the left @ £128 each are the Cardeza entourage, who enjoyed a private promenade suite. Notice how quickly the curve falls off.
Here are some key statistics:
25%-ile = £26 10s 6d (~£3,106 in today’s money)
50%-ile = £30 (~£3,510)
75%-ile = £39 7s 4d (~£4,633)
95%-ile = £50 8s 11d (~£5,908)
Mean = £34 12s 11d (~£4,036)
Median = £30 (~£3,510)
Mode = £41 8s 10s (~£4,883)
Remember that today’s first and business class return plane tickets from Europe to New York include, in effect, two main meals, two snacks, a free bar, a trip to the movies and a hotel night. Plus a long queue at US Immigration at 2am jetlagged time…
A ticket on Titanic included 21 meals, seven night’s accommodation and the chance to sit back and relax for a week. To be honest, I think that a trip over the Atlantic on Titanic, were it done safely, looks like excellent value for money.
So what exactly did first class passengers get for their money? Access to the public areas of the ship was common to all. But there were many different types of stateroom available. These included:
Where on the ship: the higher the deck, the better
Place on the deck: inside or outside
Size: small, standard or large
Grade: servant, standard, deluxe, private sitting room or private promenade
Furniture: bed + wardrobe + dressing table as standard, plus either chair, sofa, sofa-table-chair combo or a private sitting room
Flexibility: permanent first class, first alternate second or second alternate first
Inside, outside or “bibby” (mainly inside, with a short passage in the cabin to a window)
Small, standard or large size
Single, double, triple or quad
A folding lav, a sink or a private bathroom
I assigned each room a score on the basis of the following:
“1st alternate 2nd“ means staterooms furnished to a first class standard but available for sale as second class, should the need arise (sold as first class on Titanic’s first and only voyage). “2nd alternate 1st A” means staterooms furnished to second class standard but available for sale as first class and sold as first class on Titanic’s first and only voyage. “2nd alternate first B“ means staterooms furnished to second class standard but available for sale as first class and sold as second class on Titanic’s first and only voyage.
The chart below plots ticket price per person against my product score. The following trends can be seen:
1. The trendline slopes up – on average better staterooms cost more per person
2. The entry price for better staterooms is remarkably consistent at around £26 – like airlines today, White Star knew the importance of offering a bargain to move inventory that would otherwise go unsold
3. The “spread” of fares increases as stateroom quality increases – like we see today when airlines offer fares in first and business class that range from the good value to the enormous.
Source: Encyclopedia Titanica, Oliver Ranson’s analysis, Alfred Nourney shown at second class fare excluding first class upgrade – zero fare/high product score is line president J Bruce Ismay
Different prices for different passengers, even for the same product. That’s a form of revenue management. 112 years ago!
oliver AT ransonpricing DOT com