Saturday, 1 March 2014

Re-inventing revenue management

Full article in JPG format:
page 36/37 & page 38

Revenue management has passed through numerous phases since its widespread adoption in the 1980s. The discipline continues to evolve today, experimenting with different ways of matching the right price to the right customer.

Following deregulation in the US, the airline industry's initial focus was on maximizing revenue in an increasingly competitive marketplace. Seat inventory controls used historical demand forecasts to assign optimal price points for distinct passengers, factoring in the length of time until travel and the gradually shrinking pool of seat availability. Hence the sharp rise in ticket prices on last-minute bookings.

The mathematical algorithms making these calculations became more sophisticated over time, incorporating ever-more complex considerations ranging from competitors' offerings to seasonal holidays and events. But the overarching goal remained matching passenger demand with a perishable supply of seats in the most revenue-maximal way...