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Author: Michael David Wittman Publisher: ISBN: Category : Languages : en Pages : 228
Book Description
Even as the distribution and sale of commercial airline tickets has shifted in recent years from physical reservation offices to the Internet, many airline commercial processes remain highly reliant on pre-Internet technologies and standards. This legacy infrastructure compels airlines to publish a discrete set of prices in each market they serve, and to select prices for each itinerary from among only this limited set of possible price points. Recent advancements in distribution technology, such as the New Distribution Capability (NDC), offer airlines the chance to break away from these constraints. These new standards enable the creation of customized offers with prices that could be generated dynamically in real time. While airlines have shown interest in these new technologies, practical methods for integrating dynamic pricing into existing airline revenue management (RM) and distribution systems have yet to be defined and evaluated by academics or practitioners. In this work, we propose the first mechanisms for dynamic pricing designed specifically for use in the airline industry. By selectively providing increments or discounts based on demand segmentation and estimates of willingness-to-pay (WTP), our mechanisms can increase airline revenues by stimulating new bookings from price-sensitive travelers while encouraging more price-inelastic travelers to buy up to higher price points. Moreover, the methods are compatible with the pricing, RM, and distribution systems currently used by airlines today. Our dynamic pricing heuristics emerge from the development of a novel theoretical model of customer choice. Using the model, we introduce a new concept called "conditional WTP" to describe how a customer's willingness-to-pay for an itinerary can change depending on the other alternatives available in his choice set. We show how assuming an unchanging maximum WTP for air travel, as in past work on dynamic pricing, can lead to overestimation of WTP in competitive environments, and describe how an airline's estimates of conditional WTP play an integral role in our dynamic pricing mechanisms. We test our dynamic pricing methods in the Passenger Origin-Destination Simulator (PODS): a robust agent-based booking simulation that models the interactions between passengers and airlines. In a complex, competitive network, we find that our heuristics can increase airline revenues by up to 1 - 4% from traditional pricing and RM alone. Incrementing prices can result in revenue gains through an increase in yield, and discounting can lead to higher revenues through demand stimulation and share shift from other airlines. In both cases, we identify a phenomenon we call "forecast spiral-up" which increases yield by protecting more seats for higher-value fare classes. We also develop a variant of the heuristic in which multiple substitutable flights are priced simultaneously, leading to additional revenue gains. Finally, we provide the first in-depth assessment of the practical implications of dynamic pricing for the airline industry. We focus on airline concerns that dynamic pricing could lead to price wars, excessive discounting, and a race to the bottom. We also evaluate some of the potential legal implications and customer reactions that could emerge as dynamic pricing becomes more commonplace. These analyses provide new insight on how airline competition could potentially change as dynamic pricing is integrated into traditional airline processes.
Author: Michael David Wittman Publisher: ISBN: Category : Languages : en Pages : 228
Book Description
Even as the distribution and sale of commercial airline tickets has shifted in recent years from physical reservation offices to the Internet, many airline commercial processes remain highly reliant on pre-Internet technologies and standards. This legacy infrastructure compels airlines to publish a discrete set of prices in each market they serve, and to select prices for each itinerary from among only this limited set of possible price points. Recent advancements in distribution technology, such as the New Distribution Capability (NDC), offer airlines the chance to break away from these constraints. These new standards enable the creation of customized offers with prices that could be generated dynamically in real time. While airlines have shown interest in these new technologies, practical methods for integrating dynamic pricing into existing airline revenue management (RM) and distribution systems have yet to be defined and evaluated by academics or practitioners. In this work, we propose the first mechanisms for dynamic pricing designed specifically for use in the airline industry. By selectively providing increments or discounts based on demand segmentation and estimates of willingness-to-pay (WTP), our mechanisms can increase airline revenues by stimulating new bookings from price-sensitive travelers while encouraging more price-inelastic travelers to buy up to higher price points. Moreover, the methods are compatible with the pricing, RM, and distribution systems currently used by airlines today. Our dynamic pricing heuristics emerge from the development of a novel theoretical model of customer choice. Using the model, we introduce a new concept called "conditional WTP" to describe how a customer's willingness-to-pay for an itinerary can change depending on the other alternatives available in his choice set. We show how assuming an unchanging maximum WTP for air travel, as in past work on dynamic pricing, can lead to overestimation of WTP in competitive environments, and describe how an airline's estimates of conditional WTP play an integral role in our dynamic pricing mechanisms. We test our dynamic pricing methods in the Passenger Origin-Destination Simulator (PODS): a robust agent-based booking simulation that models the interactions between passengers and airlines. In a complex, competitive network, we find that our heuristics can increase airline revenues by up to 1 - 4% from traditional pricing and RM alone. Incrementing prices can result in revenue gains through an increase in yield, and discounting can lead to higher revenues through demand stimulation and share shift from other airlines. In both cases, we identify a phenomenon we call "forecast spiral-up" which increases yield by protecting more seats for higher-value fare classes. We also develop a variant of the heuristic in which multiple substitutable flights are priced simultaneously, leading to additional revenue gains. Finally, we provide the first in-depth assessment of the practical implications of dynamic pricing for the airline industry. We focus on airline concerns that dynamic pricing could lead to price wars, excessive discounting, and a race to the bottom. We also evaluate some of the potential legal implications and customer reactions that could emerge as dynamic pricing becomes more commonplace. These analyses provide new insight on how airline competition could potentially change as dynamic pricing is integrated into traditional airline processes.
Author: Kevin K. Wang (S. M.) Publisher: ISBN: Category : Languages : en Pages : 144
Book Description
Airline revenue management will have to adapt to a new world of airline retailing enabled by the New Distribution Capability. One area of interest is Dynamic Offer Generation (DOG), in which airlines respond to every booking request in real-time with a customized set of offers and prices. In these offers, ancillary services may be bundled with the flight. Selecting and pricing these offer sets represents a new joint pricing and assortment optimization problem in revenue management. We propose a formulation for the dynamic offer generation problem and study the robustness of its solution. We derive conditions under which selling the flight in a bundle with an ancillary service increases total net revenues over selling the ancillary as an optional add-on. We show how this model integrates with traditional revenue management systems. We simulate DOG under competition in the Passenger Origin-Destination Simulator (PODS) to show the potential revenue benefits. The simulation results show that bundling the flight with an ancillary service can generate higher revenues than selling both services separately. This is especially true when the ancillary service is highly valued by passengers, can be provided at low cost by the airline and passengers make purchase decisions rationally. We also show that price segmentation between passenger types can increase revenue and that there is a first-mover advantage for airlines to implement dynamic offer generation mechanisms. When one of four airlines implements DOG, it can increase its total net revenue by up to 2.6% through ancillary bundling alone and up to 12% in combination with dynamic flight pricing. Most of these dynamic flight pricing gains are attributable to undercutting the existing fares offered by airlines with traditional RM systems. When all four airlines use DOG, their revenue increases by up to 0.9% through bundling alone and 7% with dynamic pricing. Under more realistic market conditions, the simulated net revenue gain of DOG reduces to 1.7% when all airlines implement it.
Author: Kalyan T. Talluri Publisher: Springer Science & Business Media ISBN: 0387273913 Category : Business & Economics Languages : en Pages : 731
Book Description
Revenue management (RM) has emerged as one of the most important new business practices in recent times. This book is the first comprehensive reference book to be published in the field of RM. It unifies the field, drawing from industry sources as well as relevant research from disparate disciplines, as well as documenting industry practices and implementation details. Successful hardcover version published in April 2004.
Author: Robert Phillips Publisher: Stanford University Press ISBN: 0804781648 Category : Business & Economics Languages : en Pages : 470
Book Description
This is the first comprehensive introduction to the concepts, theories, and applications of pricing and revenue optimization. From the initial success of "yield management" in the commercial airline industry down to more recent successes of markdown management and dynamic pricing, the application of mathematical analysis to optimize pricing has become increasingly important across many different industries. But, since pricing and revenue optimization has involved the use of sophisticated mathematical techniques, the topic has remained largely inaccessible to students and the typical manager. With methods proven in the MBA courses taught by the author at Columbia and Stanford Business Schools, this book presents the basic concepts of pricing and revenue optimization in a form accessible to MBA students, MS students, and advanced undergraduates. In addition, managers will find the practical approach to the issue of pricing and revenue optimization invaluable. Solutions to the end-of-chapter exercises are available to instructors who are using this book in their courses. For access to the solutions manual, please contact [email protected].
Author: Alexander R. Papen Publisher: ISBN: Category : Languages : en Pages : 142
Book Description
Traditionally, airlines have been limited to a set of fixed price points to distribute their fare products. The advent of IATA’s New Distribution Capability (NDC), however, will soon enable airlines to quote any fare from a continuous range. In theory, such continuous pricing could increase revenues by extracting more of the consumer surplus, through its ability to offer fares closer to the customer’s willingness-to-pay. This thesis examines the impacts of continuous pricing in competitive airline networks through simulation in the Passenger Origin-Destination Simulator (PODS). To this end, both class-based and classless RM methods for continuous pricing are presented. Class-based continuous RM relies on the same underlying forecasting and optimization models as traditional RM, while quoting a single continuous fare. Classless RM, on the other hand, completely abandons the notion of pre-specified fare classes, but instead forecasts and optimizes over a temporal dimension. Simulations show that the improved pricing granularity from continuous pricing results in revenue gains of 1-2% when adopted by all airlines, while the gain for the first-mover might be as high as 10-15%. These revenue gains are driven by the ability of continuous pricing to generate lower fares, in-between existing price points, towards the end of the booking horizon. These lower fares, in turn, result in the stimulation of new demand and capture of high-yield business passengers from competitors. We conclude by showing that an airline with traditional RM can reduce, or even reverse, the impact of a competitor moving to continuous pricing by inserting additional price points, adjusting its own RM system settings, or discounting its upper fares. Compared to the current general practice of fare matching, these less transparent competitive responses could have negative impacts on revenues throughout the industry when airlines repeatedly respond to each other’s pricing actions.
Author: Curt Cramer Publisher: Springer Nature ISBN: 3658337214 Category : Business & Economics Languages : en Pages : 122
Book Description
The book provides a comprehensive overview of current practices and future directions in airline revenue management. It explains state-of-the-art revenue management approaches and outlines how these will be augmented and enhanced through modern data science and machine learning methods in the future. Several practical examples and applications will make the reader familiar with the relevance of the corresponding ideas and concepts for an airline commercial organization. The book is ideal for both students in the field of airline and tourism management as well as for practitioners and industry experts seeking to refresh their knowledge about current and future revenue management approaches, as well as to get an introductory understanding of data science and machine learning methods. Each chapter closes with a checkpoint, allowing the reader to deepen the understanding of the contents covered.This textbook has been recommended and developed for university courses in Germany, Austria and Switzerland.
Author: Publisher: Emerald Group Publishing ISBN: 1846630126 Category : Airlines Languages : en Pages : 53
Book Description
The Airline industry has been under increasing pressure recently, from the increased competition of low-cost airlines and the terrorist events of 2001 to name but a few. Various US airlines, including Delta and Northwest, have been declared bankrupt, oil prices have soared, and seat prices are still being forced down, the supply far outweighing the demand. This e-book looks at recent case studies of airlines in crisis (Continental Airlines), and also airlines which have excelled at expansion during this turbulent time such as Easyjet and Ryanair, and offers examples of successful strategies previously used. The collection also features interviews with high-profile figures from airlines such as Go!, Qatar Airways and SWISS International Airlines.
Author: Stanislav Ivanov Publisher: Zangador ISBN: 9549278638 Category : Travel Languages : en Pages : 205
Book Description
This research monograph aims at developing an integrative framework of hotel revenue management. It elaborates the fundamental theoretical concepts in the field of hotel revenue management like the revenue management system, process, metrics, analysis, forecasting, segmentation and profiling, and ethical issues. Special attention is paid on the pricing and non-pricing revenue management tools used by hoteliers to maximise their revenues and gross operating profit. The monograph investigates the revenue management practices of accommodation establishments in Bulgaria and provides recommendations for their improvement. The book is suitable for undergraduate and graduate students in tourism, hospitality, hotel management, services studies programmes, and researchers interested in revenue/yield management. The book may also be used by hotel general managers, marketing managers, revenue managers and other practitioners looking for ways to improve their knowledge in the field.
Author: Nicholas James Liotta Publisher: ISBN: Category : Languages : en Pages : 132
Book Description
The development of the New Distribution Capability for airlines has raised interest within the airline industry in “continuous pricing”, where fares offered to customers are not limited to a set of pre-determined price points. This thesis provides an overview of experiments on four revenue management (RM) methods proposed for the practical implementation of continuous pricing. Two of these methods, termed class-based RM for continuous pricing, utilize existing forecasting and seat protection optimization methods to determine what fares to offer. The other two methods, termed classless RM, calculate optimal fares based on the maximization of expected revenue contribution at a given point in time during the booking process. This thesis examines the performance of probabilistic bidprice and unbucketed dynamic programming methods for both the class-based and the classless methods for continuous pricing. The continuous pricing methods are compared with traditional class-based methods in unrestricted fare structures using the Passenger Origin Destination Simulator. Compared to a baseline with six fare classes, when two competing airlines both implement class-based continuous pricing, revenues can increase by up to 1%, and, when both airlines implement classless pricing, they can gain up to 2% in revenue. When only one airline implements continuous pricing in a competitive setting, revenue gains of 10–13% are possible over the six-fare class baseline. These larger gains mostly come at the expense of the competitor, which loses revenue and bookings. For all cases, as the number of fare classes in the baseline increases, the revenue gains of continuous pricing are diminished and may even become revenue losses under certain conditions. The positive results of the continuous pricing methods are a result of the increased price granularity offered by continuous pricing. It is this price granularity that causes most of the revenue gains when a competitor airline does not switch to continuous pricing. The price granularity effect also explains why increasing the number of fare classes with the traditional class-based RM methods can generate as much and sometimes more revenue than the continuous pricing methods.
Author: Ben Vinod Publisher: Springer Nature ISBN: 3030704246 Category : Business & Economics Languages : en Pages : 417
Book Description
This book chronicles airline revenue management from its early origins to the last frontier. Since its inception revenue management has now become an integral part of the airline business process for competitive advantage. The field has progressed from inventory control of the base fare, to managing bundles of base fare and air ancillaries, to the precise inventory control at the individual seat level. The author provides an end-to-end view of pricing and revenue management in the airline industry covering airline pricing, advances in revenue management, availability, and air shopping, offer management and product distribution, agency revenue management, impact of revenue management across airline planning and operations, and emerging technologies is travel. The target audience of this book is practitioners who want to understand the basics and have an end-to-end view of revenue management.
Author: Michael David Wittman
Author: Michael David Wittman
Author: Kevin K. Wang (S. M.)
Author: Kalyan T. Talluri
Author: Robert Phillips
Author: Alexander R. Papen
Author: Curt Cramer
Author: 
Author: Stanislav Ivanov
Author: Nicholas James Liotta
Author: Ben Vinod