In an article published in Voyage d’Affaires, online on 28 January, Florent Guillemin reports on the 1st meeting of the Carrefour des Experts 2019. He discusses what he calls « reverse yield management », i.e. post-booking market opportunities. As we will do from now on to advance the debate, or share our sometimes conflicting convictions, here is our take on this subject, which touches on the very essence of our profession.
Price management has become increasingly uncertain
Yield had been the rule for almost 25 years: prices rose as the date of travel drew nearer. But with the arrival of low-cost operators and the intensification of competition, the rules changed: traditional airlines began to vary their prices more randomly, particularly downwards. And the wolves have entered the fold.
Big data may be the answer, but we're no longer asking the right questions
Yield management professionals – which is what we are – have designed increasingly sophisticated tools, fuelled by data, the explosion of which has revolutionised our profession. But by integrating more and more information, we have lost control of the solutions, which has amplified the disorder in fare management and the frequency of price cuts.
Startups have sniffed out the smell of blood
They are called Yapta, TripBam or FairFly and have built their business on this promise: to check whether a better price is possible right up to the point of departure and to seize every opportunity to launch cancel-rebooks. Like the start-ups that have sprung up in the wake of overbooking, they take advantage of the loopholes in the system to optimise the purchase price for travellers.
The airlines draw their 49.3
Under attack from all sides, the airlines began to unravel what had taken them twenty years to build: the elimination of intermediaries.
They had succeeded in bringing the Agencies under control with the 0-rate commission in 2005. Then they attacked the GDSs (Amadeus, Galileo, Sabre and Worldspan), which were capturing what they considered an exaggerated share of their margins, by migrating to distribution solutions that were better controlled thanks to NDCs (New Distribution Capability). But now other players, of a different nature, are taking their place and interfering in the booking process.
Three solutions to restore peace to households
Firstly, we’re going back to basics. Upward pricing is the basic rule of our business: the price of flexible tickets must not fall over the long term, whatever happens, otherwise we run the risk of cancel-rebooking: customers who have bought their ticket at full price – and who enable the airline to make money – cancel it to buy another at a lower price to fill the aircraft.
Then we continue to segment. Fortunately, these phenomena were largely anticipated, with a multitude of different fares depending on customer habits and types.
In reality, only non-flexible prices can be reduced, as they are neither exchangeable nor refundable.
And finally, we adapt. The aim is to avoid customers switching from a flexible price to a more advantageous non-flexible offer. So if the prices of non-flexible prices have to fall, it must not be too close to departure. Or else with certain price conditions that prevent business travellers from slipping in: spending at least four nights on site (Mini Stay) or the Saturday night (Sunday Rule)…
Our business is exciting because it is constantly changing. More than ever, we need to keep a cool head so that we can remain effective players in this inevitable change.
Keywords: Yield, Big Data, Startups, Pricing, price