PROS Gains Travel Tech Sales Uplift With United Airlines Deal

PROS (Pricing and Revenue Optimization Solutions) only makes about 45 percent of its revenue from selling enterprise software to airlines. Yet the Houston-based company has been spending significantly in a long-term bet on airlines as software buyers.

“PROS already touches 45 percent of all passengers boarded globally, meaning their trips involve use of our platform behind the scenes,” said president and CEO Andres Reiner. “We plan to grow that. Our strategy has been, ‘how do we help airlines thrive in the digital era across every aspect of their business?'”

The company has made relevant acquisitions. Earlier this month, PROS bought Everymundo, a software maker primarily for airlines, for $80 million. In 2019, it bought Travelaer, an airline tech vendor, in a deal valued at about $12 million.

While the pandemic has caused many airlines to pause tech projects or renegotiate pricing with PROS, the crisis has also spurred some carriers to rethink their approach to technology, opening up a chance for new sales. It has 1,600 employees, with about 700 of those in research and development and 40 data scientists.

United Airlines is one example. The Chicago.-based carrier is implementing a PROS tool to help its sales teams configure, price, and quote terms for contracts with corporate customers buying business travel. United says it’s the first U.S. airline to do this for passenger traffic.

To give some context, United signs contracts with thousands of corporations to sell them travel. The deals include discounts or rebates — plus freebies on some prepaid elements, which might include free checked luggage.

“It’s taking what’s already a fairly complex field of airline pricing in travel and adding another layer of B2B [business-to-business] complexity on top of it,” said Glenn Hollister, vice president of sales strategy and effectiveness at United at an investor conference last month.

“We had been using an airline industry-specific solution for contracting for about 20 years,” Hollister said. “We needed to move to this new solution that will allow us to work in a modern way and to differentiate from what our competitors do.”

United invited 10 vendors to bid for the software contracting business. It wanted a solution able to handle the volume of data and calculation it needed. It also wanted a vendor they could feel confident would deliver on time and on budget. And the airline liked that PROS was familiar with its business from providing other software to it already.

“That together made PROS the real clear choice,” Hollister said.

Expanding Its Product Range

To broaden its customer base, PROS has created basic versions of some of its solutions to appeal to smaller airlines that couldn’t typically afford its products before. In the third quarter, Air Transat and Scoot became customers with an “essentials” revenue management product.

The company has also diversified its products to help with sales.

This year it began to widely sell a solution to help airlines manage group sales with more automation and less manual work.

Swiss Airlines uses this product. On the airline’s website, a buyer planning a conference or other event can book up to 10 passengers online rather than call the carrier’s group deal desk. Changes to passenger names and the size of the group can also be serviced via the airline’s extranet, PROS said.

“The goal that an airline should set is that you, as a corporate buyer, should never have to call to make a reservation or change a booking,” Reiner said.

Running Losses and Facing Rivals

PROS has run losses since 2015 when it began its capital-intensive move from offering on-premise solutions under a licensing model to providing cloud-based systems on a subscription model. The transition is nearly complete, with 85 percent of its recurring revenue coming from its cloud-based tools.

The company also faces intense competition across the segments it serves. In the airline space, the startup Flyr has attracted backing from all-star investors in September as it attempts to sign up airlines to its revenue management system. PROS already offers similar tools that essentially help airlines price flights optimally given supply and demand signals.

“We have not lost a customer to Flyr,” Reiner said. “No airline has replaced PROS.”

Amadeus has also been one of the strongest competitors to PROS.

“We’re fairly humble, but I believe we’re significantly ahead on our innovation,” Reiner said. “They tend to follow our lead, and we’ve always set the standard for innovation.“

“In the airline segment, we have a historically better than 93 percent gross-level retention rate,” Reiner said.

Covid has prompted some airlines to pause implementations or attempt to renegotiate contract terms, the company said, with airline bankruptcies costing the vendor at least $2 million this year in likely lost business.

Improving Online Ticket Booking

Looking ahead, PROS sees an opportunity to improve the decades’ old booking process most airlines use for selling tickets on their websites and apps. Travelers typically go through screen after screen of requests, such as whether they want to pay to bring a pet on their trip, before completing a booking.

In an age when consumers want to make purchases as fast as Hotel Tonight or Grab lets them, consumers want quicker and more intuitive ways to buy online.

“One of the most important next steps for airlines is to understand shopping data as well as booking data,” Reiner said. “You want to know what customers looked at and compare it to what they bought so you can improve your conversion. But right now that data is mostly siloed at airlines.”

“We’ve been investing very aggressively on augmented our algorithms based on shopping data,” Reiner said. “We have seen we can improve the performance of demand forecasting by 20 to 40 percent.”

Spending on research and development is key to this. The company has increased its spending each year, with full-year 2020 levels at $75.6 million, up from $55.7 million in 2018.

Commitment to a Diverse Workforce

During a time in the U.S. when diversity and inclusion efforts have gained prominence, PROS stands out as a Texas-based company with some notable accomplishments to tout.

In the U.S., 26 percent of its employees represent underrepresented minority groups, and about 20 percent of managers globally do the same. About 30 percent of managers are women.

“There’s always more work to do, but we run programs to help staff at every level to see the importance of diversity and inclusion,” Reiner said. “We’re way more open than the typical organization in allowing people to jump between units, such as letting someone from engineering try sales.”

“For example, our investor relations is led by someone who came out of our delivery organization, which is not a typical career path,” Reiner said. “We experiment with non-traditional ways to help people grow.”