Let me start by saying that dynamic pricing isn’t something new. In fact its origins go way, way back to the midst of time, when pricing was simply influenced by supply and demand.
It was a rigid model, when high demand coincided with short supply (either supply in the total market or for that particular product) then the more you could charge for the product. Easy.
The basic principles of dynamic pricing haven’t really changed since then but the variables available using advanced data and technology are starting to cause a seismic shift in the way airlines operate their business.
Dynamic pricing looks at more than just the traditional factors, and online retailers like Amazon and eBay have used this strategy to help them become the retail behemoths they are today. Hotels today also do dynamic pricing to a certain extent.
Historically, airlines have always been keen to adopt revenue management technologies.
Even as far back as the early 80s they were actively bundling together customers according to various attributes - separating leisure travellers from business travellers for example.
This strategy generated additional revenue for airlines and played a big part in their success.
We know that airlines are not averse to change in technology but their revenue model has always focused on ticket pricing.
The pricing is based on RBDs (Reservation Booking Designators) and Fare Basis (an alpha or alpha-numeric code used by airlines to identify a fare type and allow airline staff and travel agents to find the rules applicable to that fare).
Airlines file the fares in ATPCO (Airline Tariff Publishing Company) according to the RBDs and fare basis. The distribution channels mostly pick the fares from this external third party to construct an offer to the customer through a Travel Agent (they generate 60% to 65% of the airlines overall business).
01/03/18 Rajendran Vellapalath/Phocus Wire
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It was a rigid model, when high demand coincided with short supply (either supply in the total market or for that particular product) then the more you could charge for the product. Easy.
The basic principles of dynamic pricing haven’t really changed since then but the variables available using advanced data and technology are starting to cause a seismic shift in the way airlines operate their business.
Dynamic pricing looks at more than just the traditional factors, and online retailers like Amazon and eBay have used this strategy to help them become the retail behemoths they are today. Hotels today also do dynamic pricing to a certain extent.
Historically, airlines have always been keen to adopt revenue management technologies.
Even as far back as the early 80s they were actively bundling together customers according to various attributes - separating leisure travellers from business travellers for example.
This strategy generated additional revenue for airlines and played a big part in their success.
We know that airlines are not averse to change in technology but their revenue model has always focused on ticket pricing.
The pricing is based on RBDs (Reservation Booking Designators) and Fare Basis (an alpha or alpha-numeric code used by airlines to identify a fare type and allow airline staff and travel agents to find the rules applicable to that fare).
Airlines file the fares in ATPCO (Airline Tariff Publishing Company) according to the RBDs and fare basis. The distribution channels mostly pick the fares from this external third party to construct an offer to the customer through a Travel Agent (they generate 60% to 65% of the airlines overall business).
01/03/18 Rajendran Vellapalath/Phocus Wire
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