Click to edit title. REVENUE MANAGEMENT AND DYNAMIC PRICING IN BRUSSELS AIRLINES.

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Presentation transcript:

Click to edit title. REVENUE MANAGEMENT AND DYNAMIC PRICING IN BRUSSELS AIRLINES

Click to edit title. Yorick Buys 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

Click to edit title. What is revenue management? Tools used by RM Key points Price elasticity Willingness to pay Prerequisites Content

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!

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

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

Click to edit title. What is dynamic pricing Define and find a single optimal price for all space remaining at the current time Find customers’ willingness to pay given competitive conditions and days prior departure

Click to edit title. How does it work ?

Click to edit title. How does it work? – System view

Click to edit title. How Does it work?- revenue based approach

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

Click to edit title. Booking patterns

Click to edit title. Booking patterns

Click to edit title. Price elasticity of demand

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

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