Services Marketing

Revenue Management of
Gondolas

Case Background
The gondola is one of the typical Venice experiences.
Gondolas were created as a transportation tool since the
whole city of Venice is filled with canals.
Nowadays, gondolas have become more like an

exotic

experience for tourists.

Gondolas are strictly tied with tradition.
The numbers of gondolas dropped from several thousand in
18th century to around 425 today.
The price of gondola is 80 euros for 40 minutes (6 passengers
maximum).
Customers

can

book

the

gondolas

directly

gondoliers, through the hotel or travel agency.

with

the
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The Dilemma
Although the demand for Gondola Rides is
extremely high, the capacity issues seem to be
constraining the number of rides that can be
offered.
The pressure of maintaining tradition and
increasing revenue was the main dilemma.

Question 1

What can be done to increase the capacity of gondolas?

Answer 1
Modification
Modification of gondolas length and width can be
altered

to

make

it

accommodate

more

people.

However, it should be tested.

Low Season
Repair

and

Maintenance

of

Gondolas

can

be

performed.
Discount and promotions can be offered to attract
tourists.
Special Gondola routes can be offered for a specific

Answer 1 (Contd)
High Season
A reservation system can be created where customers
can book a tour online. This will help in estimating
customers and capacity.
Different gondola routes and control the capacity of
each route. Thus, traffic in the canals can be reduced.
The pricing strategy can also be set according to the
route. Special routes can be offered for the customers
who can pay the price. Basic routes can be offered for a
lesser price for those who just want to have gondola
experience.

Answer 1 (Contd)
Revenue Impacts
Gondola redesign can help accommodate more customers,
therefore, the revenue can be increased.
Appropriate training and gondola maintenance during
low season can ensure best use.
Promotions

during

low

season

may

help

influence

customers traveling intention.

The reservation system can help forecast number of
customers

and

make

the

best

use

of

gondolas

and

gondoliers.
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Question 2

How can you balance revenue maximization with

the maintenance of cultural heritage? Is it possible?
if so, what would you recommend?

Answer 2
Prices should be clear, logical and fair.
The rates for each ride (day and night) should be clearly
specified. The reservation process should be clear and
terms of cancellation should also be specified. Confirmed
bookings should be available under any circumstances.
Communicate Consumer Benefits for the Price offered.
The choice of packages with higher prices offering dinner and
music in the Gondola recognizes that customers are willing to
and able to pay more. This makes it possible to sell other seats
at a lower price. It allows each customers to find the price and
benefits (value) balance that best satisfies his or her needs.
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Answer 2 (Contd)
The Loyal Customer
The Online Reservation system can help in identifying regular
customers. Loyal customers should be offered benefits even
when they are paying a premium.
Compensate for Over Booking
Occasionally,

reservations

overbooking.

Such

cannot

customers

be

honoured

should

be

due

to

given

compensation.
They should be given a choice of 100% refund or a trip for
another day (advance or later). Possibility of cancellation
due to overbooking should be notified in advance.

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Answer 2 (Contd)
Customers should be offered a substitute service
in Venice. An upgradation in service (dinner &
music) is also an option that can be provided.

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Question 3

Consider the pricing structure of the gondolas. What

sort of changes would you recommend? How would
customers react? What revenue impact would your
recommendations have?

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Answer 3
Although the Gondola rates are regulated, i.e., 80 Euros
for Day trips and 100 Euros for Night Trips, many prices are
set through negotiation. Dinner and music will be charged
extra.
80% of the Gondolla business comes from tour operators
and gondoliers also prefer working with them since it
guarantees a steady stream of business.
When Gondolla trip are clubbed other travel options,
customers are not aware of the price of the Gondola ride.
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Answer 3 (Contd)
Recommendations
The Tour Operator profit margins are the highest in this
business. The tour operators passes some of this revenue
to the Stazi who in turn distributes it to the Gondolas.
The Gondoliers must set their prices in such a way that
they recover the full costs of producing and marketing
the service and add a sufficient margin.
Gondolas create an experience for tourists more than just
a mode of transportation. Marketers must create a clear
association between price and value to the customer
through proper communication.

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Answer 3 (Contd)
Venice receives 20 million tourists per year of which less
than half spend the night. Since 2004, there has been a
30% increase in the number of overnight stays. This
gives an opportunity for increasing overnight rides. It
will bring a marginal revenue of 20 Euros per ride. That
is, 5 rides in a day is equal to 4 rides at night.
There

is

no

direct

competition

for

Gondolas.

So

customers cannot find a competing offering to compare

prices. Unless, a customer considers Gondolas as a mode
of transportation rather than an experience, customers are
willing to pay the price.

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Answer 3 (Contd)
Tour Operators bring in steady stream of revenue for
the Gondoliers. Gondoliers can reserve their capacity for
customers brought in by Tour Operators, especially for
those market segments who are ready to pay a
premium in the last minute.

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Answer 3 (Contd)
Customer Reaction
Since many prices are set through negotiation and since
tour operators may get a discount due to the volume
of customers they bring in, there might be a possibility
of price discrimination in the minds of customers,
especially who book directly. Similarly, local customers
are also charged lesser than tourists.
So, the prices should be set comparatively and not very
differently in order to avoid loss of trust and customer
dissatisfaction.
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Thank You
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