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Click to edit title.
REVENUE MANAGEMENT AND DYNAMIC PRICING IN BRUSSELS AIRLINES
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Click to edit title.• Yorick Buys ([email protected])
• 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
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Click to edit title.• What is revenue management?
• Tools used by RM
• Key points
• Price elasticity
• Willingness to pay
• Prerequisites
Content
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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!
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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
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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
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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
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Click to edit title.How does it work ?
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Click to edit title.How does it work? – System view
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Click to edit title.How Does it work?- revenue based approach
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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
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Click to edit title.Booking patterns
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Click to edit title.Booking patterns
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Click to edit title.Price elasticity of demand
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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
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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