Want to maximise revenue from your existing airport inventory?
Revenue management is a variable pricing strategy commonly used in the airport industry. It requires you to anticipate demand and use it to optimise availability and pricing to achieve the best possible financial results.
It’s the bigger, broader, more holistic cousin of yield management, i.e. selling the right product to the right customer at the right price via the right platform with the highest cost-efficiency.
However, unlike yield management, revenue management considers more than just the price of a product, embracing ancillary spending and the cost involved in selling the booking too.
For revenue management to be possible, the following conditions must apply:
- Different customers are willing to pay different prices for the same goods or services
- The business must be able to predict changing levels of demand
- There is a fixed amount of products available
- The product is ‘perishable’ – It is only available until a defined date and time
This list makes it easy to see how this is the perfect strategy for airports, airlines and car park operators.
How does revenue management work?
Revenue management requires a company to predict demand for its products or services and customers’ wants and needs. Armed with these predictions, it can create an effective, flexible pricing strategy to maximise profits and minimise losses.
Revenue management example
Let’s say an aeroplane has 300 seats. A full fare is £1,900, and a discounted ticket is £1,300. Of the following, which option is best?
A) 50 full-price fares and 250 discounted
B) 190 full-price fares and 50 discounted
C) 135 full-price fares and 135 discounted
Revenue:
A) (50 x 1,900) + (250 x 1,300) = £420,000
B) (190 x 1,900) + (50 x 1,300) = £426,000
C) (135 x 1,900) + (135 x 1,300) = £432,00
Yield:
A) 420,000 / (50 + 250) = £1,400
B) £426,000 / (190 + 50) = £1775
C) £432,000 / (135 + 135) = £1,600
Occupancy/capacity:
A) (50 + 250 / 300) x 100 = 100%
B) (190 + 50 / 300) x 100 = 80%
C) (135 + 135 / 300) x 100 = 90%
The scenario that should generate the most revenue is option C. However, it’s not necessarily the one that will give you the highest average yield (B) or occupancy (A). You can apply similar calculations to other operations, such as car park tariff and occupancy.
Benefits of revenue management for airports
Revenue management requires airports to take a data-driven approach to business decisions. As a result, they benefit in the following ways:
- Improved revenue forecasting and optimisation
- A greater understanding of customers’ wants, needs and expectations
- Improved customer experience and satisfaction
- Expansion into new markets – no missed opportunities
- Helps avoid overbooking
- Improves workflows and optimises airports staffing and resources
- Stay ahead of competition with a competitive pricing strategy to win new customers
All of these benefits make revenue management an exciting and valuable strategy for airports, but key elements need to be in place for it to be possible.
3 key elements of airport revenue management success
At the heart of every successful airport revenue strategy are three key elements – Business Intelligence, Predictive Analytics and Big Data management.
When leveraged correctly, data technology helps create a single view of existing and potential customers, revealing factors influencing a customer’s purchases and enabling airports to predict future buying patterns. It’s easy to see how this benefits airports, which can use revenue management to optimise everything from parking and lounge reservations to flights, holidays and hotel bookings.
However, it is easy to miss opportunities when dealing with lots of data. Hence, airports must harness the power of industry-specific solutions like Rezcomm’s Business modules to eliminate the guesswork, fill in the gaps and understand their data fast.
Business Intelligence
Business intelligence (BI) is an umbrella term for the wide range of tools and techniques used to analyse the vast quantities of information businesses collect daily. Remember, data is only valuable if it is analysed correctly, and this is only possible with an advanced analytical and reporting solution tailored to your industry, company and resources.
Rezcomm’s cutting-edge Business Intelligence module provides a single source of truth and a 360-degree view of every aspect of your airport operations to inform your revenue management strategy. Use it to visualise operational and product reports in real-time, so you can respond faster to changing inventory and demand with dynamic pricing strategies.
Predictive Analytics
While both BI and predictive analytics technologies analyse past data and trends, BI will tell you what is happening in your business right now. In contrast, predictive analytics will help you know what is likely to happen next.
Rezcomm’s Forecasting module uses Machine Learning to analyse vast amounts of historical and real-time data and generate predictions about future demand. Forecasting is then further quantified by increasing variables that would impact demand. All of this information feeds into the system, which uses advanced statistical techniques to identify patterns and trends within the data and use them to make highly accurate predictions.
The resulting predictions can then inform pricing, discounts and promotions, maximising revenue growth and profitability whilst offering customers true value-for-money and competitive fares.
Predictive analysis is as much about the short term as the long term. It can help organisations accurately anticipate market shifts and remain agile to changes.
Managing Big Data
The main challenge presented by big data is also the very thing that makes it useful – its sheer scale. Unfortunately, this can mean valuable information goes to waste because organisations don’t have a centralised solution to process it.
Rezcomm’s Centralised Customer Information Management module stores data from all touchpoints in a single location, making monitoring activity across your entire marketplace easier. Our unified solution enables data from various internal and external sources to be analysed, visualised and shared for greater efficiency and collaboration across your business.
By adopting a system that presents data in a manageable way, your airport can empower managers and team members, enabling them to make more informed decisions regarding revenue management and uncover new money-making opportunities.
Revenue management in real time
With Rezcomm’s real-time reporting and analytics, you can see how customers respond to different tariffs and have the flexibility to adjust accordingly. Set your airport tariffs to specific triggers and automate the process of dynamic pricing to benefit from a cost-effective, streamlined process that translates to a positive customer experience,
Factors such as peak and seasonal demand can inform pricing so that higher fares won’t result in lost sales, and lower fares will still attract a profit. With Rezcomm’s seamless, full-circle data-driven solution, revenue management becomes integrated within a wider customer-focused operational and marketing strategy.
Leverage airport revenue management with Rezcomm
We’re merely skimming the surface of the potential revenue management has to drive your airport forward and generate even more profit from existing revenue streams. But to unlock its true value, you’ll need the right tools at your fingertips.
Rezcomm’s industry-leading Business modules, provide a single source of truth, extracting valuable insights from vast amounts of data to inform your revenue management strategies. Our plug-and-play solution is ready and waiting for your airport to tap into, with just a 2-3 week launch time globally.
Ready to harness its potential? Download our Business brochure and book a meeting with our experts to get started.
