11 Sep 2018

Airline pricing get smarter, and AI systems duke it out as competition intensifies

Airline pricing is a complex science, but it’s about to get smarter as technology companies reveal new capabilities for data analysis and competitive modelling.

Last week, during the Aviation Festival in London, Sabre unveiled the new Sabre AirVision Dynamic Availability and Sabre AirVision Fares Optimizer, next-generation pricing solutions.

Sabre AirVision Fares Optimizer lets airlines adjust fares based on real-time market data. It recommends pricing structures based on customer segmentation and competitor price checks, including search and GDS activity, and estimates each customer’s potential willingness to pay based on customer data. Sabre AirVision Dynamic Availability lets airlines quickly adjust to market dynamics using data analytics.

The two AI-powered solutions, when combined with Sabre’s shopping data and Revenue Optimizer technology, offer airlines a more complete pricing and revenue management system.

Speaking with tnooz on the sidelines of Aviation Festival, London, Pramod Jain, vice president, AirVision, Marketing and Solutions Mangement at Sabre explained that while revenue management technology has been in place and developed since the 1970s, price and fares modelling is newer and less sophisticated:

“When you look at pricing it is still done on spreadsheets. It is still done based on analysts putting some numbers in and trying it out, and based on following the competition. There is no decision science over it.

What we need is that by having lots of opportunities you can be much more strategic. How do you come up with the right price for the segment?

That goes back to understanding the data that exists, the shopping data and the data that exists in the direct channel. You understand what price items you are booked in, what customers are looking for, and then you can come up with the right price points. That starts the strategic aspect of it.

Then, from a tactical standpoint, we talk about dynamic pricing quite a bit. How are you increasing or decreasing the price based on what is happening in the market?”

Greg Gilchrist, senior vice president and chief customer officer of Sabre Airline Solutions added that the aim is to help airlines “sense and respond to market conditions utilizing big data elements like GDS shopping data.”

He said:

“I can do so in a dynamic manner by understanding what’s going on in the market: what are my competitors doing? What are my customers looking for? How do I adjust in a dynamic sense to meet that opportunity?”

“Simply just matching price may be a bad thing to do in markets where your competitor doesn’t have as much availability. You may have four seats and they may have one. You selling your four seats for the price of their one seat may be a bad thing to do, because as soon as they have sold one then they don’t have availability and you may have a pricing opportunity. The market context is your competition or your shopping activity.

If you have a better product and you are underpriced there’s an opportunity for you to tactically upsell using the inventory controls. Our vision of dynamic pricing is based on solving for strategic pricing and then moving towards the details.”

The new dynamic pricing solution can work via alerts with airlines making the final decision on price adjustments, or be fully automated, adjusting pricing according to set competitive parameters. The system learns from adjustments made by the airline to various pricing suggestions, refining its future results. It also works in near real-time, adjusting to market dynamics and making suggestions throughout the day.

Etihad Airways and Aegean Airlines were announced as the first Sabre customers to implement the new pricing solutions, and the systems originated from a long-term innovation partnership between Sabre and Etihad Airways.

The new solutions are part of a broader strategic decision by Sabre to build a new Digital Commercial Platform that delivers end-to-end personalized retailing for airlines.

Customers Get Dynamic Too

This week, Advito announced a new Airfare Predictor, an advance airfare tracking tool developed in partnership with aviation business intelligence and data mining company Air Cube. The product is designed for corporate travel teams to use in negotiating fares with airlines. It reads and gathers airline prices for comparison as much as 180 days into the future, and simulates a range of real customer shopping behavior and looks not only at fares but also airline surcharges, taxes, and booking class availability.

The Advito system aims to help traveller managers gauge the value of airline offers and find the optimum booking times for lowest fares. Airfare Predictor will be integrated with Advito’s Dynamic Performance Mangement and Traveler Engagement services.

Olivier Benoit, Advito’s senior director and global air practice leader said:

“We can now answer questions that people outside of airline revenue management teams could not answer before.”

It’s easy to predict a near-term future in which AI-systems working on behalf of airlines and of their customers fight to out-guess each other’s fare tolerances. It will be interesting to discover how the search activities of “shopping” AI systems, working on behalf of customers, affect the decision-making processes of airline AI systems and the people who monitor them.


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