2nd November, 2021
Focusing on what a passenger is interested in buying or how much to charge for a travel product shouldn’t be all about forecasting or relying on the efficacy of a system. How about ensuring the product that a traveller wants is matched by the most effective price point or price optimization?
So what makes RM (revenue management) successful and effective?
According to RM expert Oliver Ranson, the same is “not about data, process, tech, statistics…it’s about people and emotions”.
This aspect is also being looked into for years now, as airlines have tried to drift away from process-centric functioning. Rather they are trying to follow a collaborative, cross-functional organization model.
Referring to Qatar Airways’ Q-Suite offering, Ranson said, “At the heart of it are the people, who are enjoying it.” He spoke during a pre-event online session that kicked off this year’s Ancillary Merchandising Conference: Revenue Management and Inflight Product.
RM executives focus on aspects like pricing, evaluate willingness to pay along with assortment optimization and inventory management.
RM, according to Ranson, helps us in getting some basic right.
- How much to charge passengers?
- How do “we send prices to buyers”?
- What do we do if people pay the wrong amount?
- How to manage the whole thing?
Revenue managers convert the layout of passenger area into revenue by visualising it as a demand curve (for instance, what price point to allocate to each seat?). RM specialists use RBDs (revenue booking designators, many airlines use similar codes for economy, business and first) to reserve seats for high fare payers. Airlines have been reworking on their pricing strategy, trying to go beyond static points and also have been incorporating a variety of travel products, including non-air ancillaries.
As for revenue generation, Ranson explained that traditional RM tries to sell the right seat to the right passenger at the right time. Total RM goes after maximizing the transaction value and loyalty tries to maximise the lifetime value of each passenger, said Ranson, who also added that RM also often contains an ancillary team. Loyalty looks at the entire CLV and RM executives generally don’t look at it in their assortment optimization. Loyalty data can also contribute a lot in RM-related decision-making.
Overall, from an organization’s perspective, as Ranson explained in one of Ai’s sessions: Do consider technology revenue (coming from the loyalty product and tends to come without operating of a flights) vs. non-technology revenue and their impact in the financial market must be delved into.
The session also featured Ann Cederhall, LeapShift.
By Ritesh Gupta
Ai Team
