The worldwide passenger ferry industry is similar in size to the airline industry, with around 5 billion passengers per year, and a market size projected to double in the coming decade. Passenger ferries are crucial elements of transportation infrastructure in countries and regions with long coastlines, islands, fjords, and large lakes. Besides their flexible operations, they are also seen as an enjoyable travel experience, as supported by numerous traveler and customer satisfaction surveys around the world.
Denmark is a relatively small country in Scandinavia with many islands – around 1,400 in total – with only 70 of them populated. Ferries strategically connect the Jutland peninsula with islands (e.g. Zealand, the island where Copenhagen is located), as well as connect the islands with each other. Another strategic connection is between Sweden and the island of Bornholm, one of the most touristic destinations in Denmark. Molslinjen operates a fleet of 21 ships (including some of the largest and fastest catamaran ferries in the world) across 10 routes, positioning Molslinjen as one of the world’s largest fast ferry operators in the world. Annually, these ferries welcome approximately 15 million guests, showcasing Molslinjen’s significant impact on regional connectivity. Molslinjen provides this transportation service on a commercial basis under regulatory constraints, while also aiming to reduce environmental impact.
The operation of passenger ferries is largely driven by the demand, which combines both passengers and vehicles. Many of those who use passenger ferries will book tickets in advance, indicating the number of passengers and type of vehicle (if any). However, booked tickets can become no-shows and a significant share of passengers come without prior booking, even within the hour prior to ferry departure. Most importantly, a key challenge that differentiates passenger ferries from other transportation industries is the fact that the vehicles have to be packed in the cargo area, as rapidly as possible, prior to departure. Any delay in packing induces delays with departure, which requires additional fuel consumption to compensate for these delays. In addition, when passengers book a ticket for their ferry ride and indicate they will come with their family car, there is no way to know the size of the vehicle. In the cargo area, each and every centimeter counts – the packing process is like playing a game of Tetris, all under the pressure of time constraints.
Molslinjen partnered with Halfspace for the design, development, and deployment of a sophisticated forecasting and revenue management toolbox that integrates advanced artificial intelligence (AI) and machine learning techniques. The forecasting solution harnesses the latest advances in learning and predictive analytics to optimize the use of ferry capacities and sailing schedules. It enables Molslinjen to predict the expected number of passengers and vehicles of different types up to one year in advance, with continuous updates to target departure time. These forecasts led to significant improvements over existing benchmarks and further enhanced other decision-making processes, especially the process of packing vehicles in the cargo area, which led to substantial operational and financial impact.
In addition, dynamic pricing strategies are a cornerstone of this solution and now a core element of Molslinjen revenue management strategies. They rely on data-driven dynamic pricing approaches that account for contextual variables such as time-of-day, seasonality, and booking patterns. The aim is to decide on the number of tickets of different categories (business, standard, and reduced fare) to be offered for sale, as well as the price of reduced fare tickets within a predefined price range. The dynamic pricing approach relies on a modified expected marginal seat revenue approach with a marginal revenue transformation. This approach not only maximizes revenue but also enhances customer satisfaction by offering competitive and fair pricing.
The innovative approach that was undertaken goes beyond enhancing operational efficiency. One of the resulting achievements is the significant reduction in Molslinjen’s environmental footprint. This is not only about optimizing operations – it is about setting exceptional new standards for the passenger ferry industry.
This collaboration, and the resulting forecasting and revenue management toolbox, has led to a decrease in the number of delayed departures, reduction in the average departure delay, reduction in fuel consumption, increase in available capacity for each departure, increase in effective sales capacity and overall revenue, as well as substantial time savings when it comes to staff planning and ferry packing. Altogether, the benefits have been estimated as 15-20 million DKK additional profits per year (equivalent to $2.6-$3.2 million USD), as well as a 3% reduction in fuel consumption and emissions. And, as the solutions are continuously being improved and added to additional routes, that number is only set to increase in the future.