AviationBy using data to tailor offerings to each customer, airlines can enhance customer satisfaction by bundling airfares with other products they need.

Dynamic pricing on airfares is getting smarter

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ATPCO says that airlines now make 12 million daily changes within its pricing database, up from just 2 million in 2018.
ATPCO says that airlines now make 12 million daily changes within its pricing database, up from just 2 million in 2018. Photo Credit: Adobe/fotoslaz

Airlines have moved steadily but gradually away from traditional merchandising over the past four years, according to data from consulting firm McKinsey.

McKinsey presented its findings at ATPCO's annual Elevate conference here on Wednesday.

Among the approximately 400 airlines that are members of ATCPO, 227 were selling only flights and basic ancillary products such as baggage in 2018 while using ATPCO's traditional price-coding system with 26 single-letter codes. Now, just 125 airlines continue to sell using the those codes, McKinsey said.

The remainder have implemented elements of modern airline retailing such as fare bundles, utilizing ATPCO's two-letter fare-filing codes to increase potential price points. Or, airlines can dynamically generate prices when customers do a search.

ATPCO says that airlines now make 12 million daily changes within its pricing database, up from just 2 million in 2018.

At the Elevate conference, ATPCO encouraged airlines to implement more dynamically generated flight offers. ATPCO defines dynamic offers as those in which the price or the displayed ancillary options is modified or created at the time of the query.

ATPCO chief strategy officer Tom Gregorson said McKinsey identified clear improvements in airline merchandising. "But we still have a long, long way to go on dynamic offerings," he said.

Dynamic offerings typically bundle the fare with ancillary products such as lounge access or seat assignments, and make use of data to tailor the offer to the customer. Advocates of the practice say it increases customer satisfaction and increases airline revenue.

Speaking at Elevate, Cory Garner, co-CEO of consulting firm T2RL, said that of 29 airlines he's queried this year, 24 said they plan to implement some form of dynamic pricing (direct or in the travel agency channel) in the next two years. That was far more than he expected.

"I was shocked by that number," said Garner. "I was aware some airlines were thinking about it. I had no idea 83% of airlines were thinking about it."

Source: Travel Weekly

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