Next-Generation Revenue Management
Innovating Analyst Productivity Through Real-Time Data
Current revenue-management systems were not designed to handle vast amounts of data. Therefore, in the near future, they will not be equipped to handle today’s progression of Big Data. New technology enables airlines to manage more complex data, offering them the power to make decisions based on current rather than stale data, and resulting in increased revenue opportunities, as well as a competitive advantage.
The airline industry is dynamic. Business challenges continue to evolve for airlines, customer demands and expectations continue to increase, and competition to acquire the right passenger is intense. Not only do these factors affect the success (or failure) of an airline, but they are also the reason particular functional areas within an airline have become even more essential to achieve success.
Revenue management is clearly one area of strategic and tactical importance.
Modern technology has paved the way for quick, easy access to an array of information of any kind, at any time. What’s missing in today’s revenue-management arena is easy access to real-time, reliable data so airline analysts are armed with the most up-to-date information to make quick, informed decisions. However, now there’s a new revenue-optimization system to address these needs and help airlines overcome the problem of outdated information and manual processes.
Revenue-management systems were created so airlines could make smarter decisions about what to sell, when to sell, to whom to sell and for which price to sell. While most revenue-management solutions are able to predict the best mix of passengers to maximize revenue, certain challenges still persist, most notably, the latency of the data in the system.
We live in a hyper-connected world, where people are able to instantly consume the latest news stories, check bank accounts, get groceries delivered at home or stream a favorite television show directly on their pocket computers, whenever they want, wherever they want, at a moment’s notice. This wasn’t always the case. Advances in technology enabled these impressive capabilities, and we’ve transformed the way we go about these daily tasks as a result.
A similar transformation is happening in the workplace as well. It is unreasonable to expect any analyst using any decision-support system to make decisions based on stale data. To overcome this challenge, a revenue-management system with real-time capabilities is needed that eliminates data lag, compiles data into one system and presents the data in an easy-to-consume format that improves analysts’ confidence in the data collected. The ability of a revenue-management system to support a quick response to all types of changes in the marketplace — big, small, internal and external — with real-time data is likely to be a game changer for the airline industry.
As airlines strive for increased efficiency of their analytical and business processes, they need to move beyond a batch-processing paradigm for their data. Currently, throughout a flight’s selling window, an airline focuses on three key areas: demand, capacity and time. Some factors may only change once or twice a month, while others may vary thousands of times per minute.
To work around this obstacle and provide a consistent view of an airline’s network, a traditional revenue-management system performs a batch process to collect data on a nightly basis. The data is used to optimize the price of the flight on average 30 to 60 times during the selling horizon of the flight. The data collected ranges from schedules and bookings to fares, availability and competitive landscape.
The baseline assumption of a batch process assumes that the data remains reasonably static throughout the course of the day; therefore, airlines are expected to trust the recommendations from the revenue-management system without any concern that the data is fluid. However, the market situation and, hence, the relevant data is not constant, so by the time a decision is made, it is already outdated and perhaps significantly sub-optimal.
Today’s revenue-management systems are not equipped to handle vast amounts of complex data. With the rapid progression of Big Data, airlines need a robust revenue-optimization system that can overcome this challenge and keep pace.
Converting from today’s batch-based paradigm to one that is event-driven and provides near real-time data collection, presentation and assimilation will not only improve market response times, but it will likely drive measurable revenue gains.
In addition, an airline cannot only focus on the frequency of data. It must also think about the volume of data the system can process. Big Data is characterized by the four Vs: volume, velocity, variety and veracity. The volume of data that can be collected has increased immensely during the last 10 years. The velocity in which we receive data is accelerating; the data collected has a wider variety than ever before; and the veracity, or credibility, of the data is a necessity.
Before long, today’s revenue-management systems will not be equipped to handle this evolution of Big Data. Therefore, airlines need a revenue-management system that is equipped to manage more complex data.
With the technological improvements during the last several years, there are scalable platforms available to fit this need. Utilizing such platforms, revenue-management leaders can expect improved productivity from analysts because the time to review flights will decrease and the time spent on strategic initiatives will increase.
With a real-time revenue-management system, the increased clarity and transparency of the data will create a more accurate picture of market dynamics at any point in the day. Analysts can comfortably allow the system to operate on autopilot, allowing them to spend more time focusing on strategic analysis of the data. Furthermore, since the data collected in real-time is stored and used for historical analysis, it can provide much richer insights into market and passenger behaviors.
An ideal system provides an airline with the power to make decisions based on current rather than outdated data, leading to opportunities to increase revenues and gain a competitive advantage. Initial studies conducted by Sabre conservatively estimate about a 0.3 percent increase in total revenue associated with the real-time aspects of revenue-management systems.
The airline industry is changing and the technology to support it is evolving. A next-generation revenue-management system that incorporates advanced technology that is robust and provides airlines with more accurate and real-time information in an easy-to-consume and simple-to-interpret format is the ideal solution for the future.
Sabre AirVision Revenue Optimizer is the answer. It will empower airlines to enhance and improve multiple revenue streams; sense and respond dynamically to rapidly changing market conditions; and maximize market share while improving analyst productivity and performance.