Hybrid airfare pricing solution recaptures revenue, with leading science

Transcription

1 CUSTOMER SUCCESS STUDY Hybrid airfare pricing solution recaptures revenue, with leading science Airline gains ability to accurately forecast and optimize price-sensitive demand Powering Modern Commerce with Dynamic Pricing Science

2 2 CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE

3 Summary Seeking improved profitability, a top-tier, Middle East-based airline needed a pricing solution that would counter buy-down a revenue-dilution problem in which low-cost competition, restrictionfree fares and pricing transparency induced higher-fare passengers to buy at lower-cost fares. Adopting the unique Hybrid feature within PROS O&D Revenue Management, the airline focused on testing revenue performance in three key markets for six routes. By enabling the airline to forecast and optimize demand, the hybrid capability helped increase revenue for these markets by 4.7%, with the six routes generating an additional US $1.5 million in fare revenue. CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE 3

4 Challenge This airline faced significant threats to revenue performance from low-cost competitors disrupting the industry with reduced fares and restriction-free purchase options. High-yield business travelers have virtually disappeared and those that remain are increasingly buying down. Customers have been trained to wait for deals. And easy access to fare information allows price-sensitive fliers to buy when seats are cheapest. Adding to these threats to revenue performance are labor-intensive, unscientific methods for managing demand. These traditional solutions do not counter buy-down behavior effectively and can cause over-allocation of low-fare seats and underallocation of high-fare seats. Breaking this cycle requires a sophisticated hybrid forecast model that utilizes both product-sensitive and price-sensitive demand to optimize seat availability and revenue. The hybrid approach to revenue management is an essential practice for future-proofing airlines against a rapidly changing travel landscape. 4 CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE

5 Solution As a PROS customer since 2008, this airline chose PROS to extend its O&D III solution to include hybrid forecasting. The hybrid module encompasses both yieldable demand (late-booking, schedulesensitive, brand-loyal) and airline-priceable demand (price-sensitive). Up-to-the-minute availability data, rich historical data, comprehensive competitive information, sophisticated customer segmentation, seasonality variations and other factors are incorporated as well. This helps ensure accurate forecasting, provides a detailed understanding of passenger willingness-to-pay, and enables the airline to utilize dynamic, real-time pricing. Because the hybrid solution is built on a proven forecasting paradigm, time-to-value is short and significantly accelerated. CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE 5

6 The PROS hybrid capabilities employ a scientific approach to forecasting and optimizing price-sensitive demand an approach that enables airlines to successfully recapture lost revenue opportunities. Brian Wishlinski, Director Strategic Consulting, PROS Travel Group Conclusion Carriers have tried various methods to combat increasing demand uncertainty and buy-down behavior methods that include seat-parking, forced class closure and artificial demand influences. Unfortunately, these methods often harm, rather than improve, revenue performance. With the PROS hybrid capabilities, this airline is now able to accurately forecast demand, anticipate buydown, determine willingness-to-pay, employ real-time dynamic pricing and, as a result, maximize its revenue. What s more, the evolution of PROS O&D Revenue Management, with hybrid optimization and Dynamic Pricing will enable the airline to break the traditional pricing paradigm by removing the barriers of class codes and fixed price points, creating a continuous range of possible prices, and using customer segmentation to price fares exactly at the passenger s willingness-to-pay point. Results PROS O&D Revenue Management with hybrid capabilities improves revenue by enabling the airline to accept more high-yield bookings and move loweryield bookings to more profitable options. Plus, when demand exceeds supply, revenue optimization enables the carrier to close low-yield classes and reserve space for higher-yield bookings. Within months of its implementation, analysis shows that this major airline increased revenue by 4.7% in three initial test markets (which serve predominantly business travelers), and generated an additional US $1.5 million in revenue on six targeted routes to/ from those markets. These numbers exceeded and were validated by results generated by PROS hybrid revenue management simulations using data from other carriers. These comprehensive studies have shown that a hybrid solution can be expected to produce a 1% to 4% revenue increase in predominantly business travel markets, and a 7% to 10% lift in predominantly leisure travel markets. 6 CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE

7 CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE 7

8 About PROS PROS is a cloud software company powering the shift to modern commerce by helping companies create personalized and frictionless buying experiences for their customers. Fueled by dynamic pricing science and machine learning, PROS solutions make it possible for companies to price, configure and sell their products and services in an omnichannel environment with speed, precision and consistency. Our customers, who are leaders in their markets, benefit from decades of data science expertise infused into our industry solutions. To learn more, visit pros.com. Copyright 2017, PROS Inc. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error -free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission. CASE STUDY HYBRID AIRFARE PRICING SOLUTION RECAPTURES REVENUE, WITH LEADING SCIENCE