click to edit title. revenue management and dynamic pricing in brussels airlines

Click to edit title.

REVENUE MANAGEMENT AND DYNAMIC PRICING IN BRUSSELS AIRLINES

Click to edit title.• Yorick Buys (yorick.buys@brusselsairlines.com)

• Graduated as aerospace engineer at TU Delft

• Two years at Brussels airlines

• Revenue Management Development Analyst

• New developments in the RM field

• System maintenance and refreshing background data

• Training newcomers

• New projects within the company where RM has involvement

Background

Click to edit title.• What is revenue management?

• Tools used by RM

• Key points

• Price elasticity

• Willingness to pay

• Prerequisites

Content

Click to edit title.What is revenue management?

Don’t sell a seat at a low fare today

if it can be sold at a higher fare

tomorrow! 

Sell the seat at a particular fare today if there’s a chance it will remain empty!

Click to edit title.What is revenue management?

Revenue Management is offering the right product to

the right customer at the right time via the right

channel

Click to edit title.What is revenue management?

Revenue Management is offering the right product to

the right customer at the right time via the right

channel

Click to edit title.What is dynamic pricing

Define and find a single optimal price for all space remaining at

the current timeFind customers’ willingness to pay given competitive

conditions and days prior departure

Click to edit title.How does it work ?

Click to edit title.How does it work? – System view

Click to edit title.How Does it work?- revenue based approach

Click to edit title.Two key points/Risks

• Risk of selling out all seats to cheap • Forecasting is necessary to predict bookings• Forecast has to be monitored and adapted during

the booking period

• Risk of selling to cheap when demand is low• Have to make people pay the most possible

amount• By searching and exploiting willingness to pay

Click to edit title.Booking patterns

Click to edit title.Booking patterns

Click to edit title.Price elasticity of demand

Click to edit title.

• It does not. Willingness to pay has nothing to do with how full your flights are!

I have 100 EUR, and I want to go

to the beach!

or

• Passenger does not care how full the flight is

• He has a budget he wants to spend

• Willingness to pay depends on outside factors (Economy, competition, etc)

Does willingness to pay depend on load factor

Click to edit title.Prerequisites for revenue management• Perishable product

• Chance to sell is lost at predetermined date

• Low variable cost• Incremental revenue translates almost entirely as income

• Fixed capacity• Increase/decrease capacity is expensive and difficult short term

• Market differentiation• Market has different needs/requirements

• Distinct market segments• Ability to segment the product

• Historical information• Historical data is available and can be used to forecast future

• Advance sales/bookings• Current booking activity provides feedback of strategies

• Electronic/automated distribution systems• GDS, reservation systems