Offer Optimization Summer Product Release 2024
Revenue Management
FORECAST FEATURES TO LEVERAGE
Why Now is the Time for a Forecast Warmup?
With COVID-19 data falling out of the historical window, it’s an opportune moment to reset forecasts and capture new passenger behaviors. This reset helps rebuild analyst confidence in the system and allows airlines to leverage numerous advanced features introduced to improve forecasts. Note that these features are already available and do not require any upgrade. By implementing these features, airlines can ensure more accurate and effective revenue management strategies.
Key Features to Implement
- DCP Segmentation
- Advanced Customer Choice Model
- Forecast Accuracy
- Willingness-to-Pay
DCP Segmentation:
Background
In the Bayesian forecast models, information sharing across Departure Control Points (DCPs) is crucial for identifying trends. Previously, booking behavior was shared across all DCPs indiscriminately (Behavior in DCP 1 impacts DCP 18 as much as DCP 2).
After this feature
Now, airlines can define DCP segments or groupings to ensure data is shared within similar behaving DCPs, but not across different groupings. Groupings can be set up by market.
This more intuitive sharing of information results in better forecasts. Setting up DCP segments requires a forecast warm-up to reset the models and build observations with the new segments applied.
This feature is currently supported for Traditional forecasts, with plans to extend it to Willingness-to-Pay (WTP) in the future. PROS Science Forecast Study is available to help airlines determine the best segments.
Watch this video to learn more about DCP Segmentation.
2. Advanced Customer Choice Model
Background
Forecasts are typically created at the Path/Time of Day (TOD) level to ensure they are robust to schedule changes. These forecasts are then distributed to the itinerary level (ODIF) for optimization purposes. Recognizing an opportunity for improvement, PROS aimed to better understand passenger behavior based on historical observations rather than relying on a standard formula. This enhancement allows analysts to manage forecasts at the TOD level while capturing demand at the itinerary level, leading to more accurate forecasts for connecting flights.
Configuring TODs for this standard model presents several challenges: How should TODs be configured given different departure and travel times? Is it more beneficial to have better accuracy with more TODs or simplify management with fewer TODs? Should airlines leave all flights in one broad Travel Time Window or divide them into more specific Travel Time Windows?
After This Feature
With the Advanced Customer Choice Model, historical distribution is used to allocate future demand at the individual departure time and travel time levels. Forecast models are created with the same level of detail as booking models, available in both Traditional and Willingness-to-Pay formats within RMA.
Advanced Customer Choice Model
The Advanced Customer Choice Model revolutionizes how demand is distributed from Path/TODs to itineraries. For example, a forecast for JFK-IAD between 08:00-09:59 might use a single model for the entire window. The new choice model distributes demand based on historical observations, allocating percentages based on actual passenger behavior. This creates improvements in forecast accuracy at the itinerary level for single leg itineraries in high frequency markets.
This model adapts to different travel times and customer preferences, providing more detailed and accurate forecasts:
This enhancement has shown a 25% improvement in Mean Squared Error, particularly benefiting high-frequency O&Ds and scenarios where passengers may not prefer the shortest travel time. Analysts spend less time managing the lowest level of detail, and the model quickly adapts to new itineraries.
Learn More about the Advanced Customer Choice Model by watching the following video.
3. Forecast Accuracy in the Forecast Workflow
Background
Improving forecast accuracy is a highly requested feature by customers, as these improvements directly translate to increased revenue for airlines (using the industry standard, a 10% increase in forecast accuracy can translate to a 1% increase in revenue). Accurate forecasts enable airlines to better understand and anticipate passenger behavior, optimize pricing, and enhance overall revenue management strategies.
After This Feature
The new Forecast Accuracy tab in the Forecast Workflow provides three ways to view data: bar chart, scatter plot, and table view. This feature is available for both Traditional and Willingness-to-Pay forecasts, offering analysts a comprehensive and flexible tool for evaluating forecast performance.
The Forecast Accuracy feature allows for easier analysis by comparing different forecast entities. Analysts gain more flexibility in how they view and interpret data, enabling them to confidently influence specific entities as needed. This level of detailed analysis helps analysts identify areas for improvement, understand emerging trends, and adjust strategies accordingly.
Watch this video to learn more about Forecast Accuracy.
4. Willingness-to-Pay
*Only available for RM Advantage
Why Should Airlines Use Willingness-to-Pay?
Willingness-to-Pay (WTP) is an innovative approach to capturing the priceable nature of passengers, transforming the way demand is forecasted. By forecasting demand as a function of price rather than class, WTP helps prevent revenue dilution. It automatically generates controls to prevent buy-down, ensuring that airlines capture maximum revenue from passengers willing to pay higher fares. This is particularly impactful in scenarios where flights are not forecasted to be full.
Benefits
WTP offers several key benefits:
- Forecast Improvements: By capturing the price-sensitive behavior of real passengers, WTP enhances forecast accuracy, which can translate to increased revenue. It better captures seasonal trends, accommodating high peaks and deeper troughs, and combats the spiral-down effect, leading to higher yields. The introduction of Transformed Fares allows airlines to control price elasticity separately from the bid price, pushing demand to higher yield classes.
- Increased User Efficiency: The automatic, scientific, and systematic controls to higher yield classes reduce the need for analysts to manage pricing strategies and manual actions, freeing up valuable time and resources.
Recently Released Features
- Influences on Alpha and Lambda: Previously, influenced demand output from formulas determined demand. Now, analysts can directly influence price elasticity (Alpha) and volume (Lambda) parameters, providing more control and intuition over forecasts.
- Viewing Alpha and Lambda in the UI: The UI now includes direct views of Alpha and Lambda, offering more insights into WTP forecasting. This allows analysts to better understand where they may want to influence forecasts, providing better controls and more confidence when influencing WTP forecasts.
WTP transforms traditional forecasting methods, offering airlines a powerful tool to optimize revenue and manage demand more effectively.
Learn more about WTP new features by watching this video.
RTDP
We are excited to introduce several new features for RTDP, designed to enhance dynamic pricing control, stay requirements, reporting capabilities, transformed fare cleanup, and cascading POC calculations. Additionally, we've improved the layout of the calculation details to enhance readability and comprehension. These enhancements aim to provide airlines with greater flexibility, precision, and insights into their pricing and revenue management strategies. Below, we will detail these new features and how they can benefit your operations.
Dynamic Pricing Control
*Only available for RTDP-U
Dynamic Pricing Influencing
As of now, there is no direct method to influence the Dynamic Price calculation in RTDP. However, airlines can apply a Fare Strategy to adjust the buy-down based on the bid price, which alters the optimal price. PROS have introduced a new Market Strategy called Dynamic Pricing Influence, enabling airlines to set bounds around the Adjustment Factor.
Actions:
MinMax: Allows setting minimum and maximum values for the Adjustment Factor.
Replace: Enables a complete replacement of the Adjustment Factor.
Stay Requirements
PROS have added "Days Prior" as a dimension in the action section for Stay Requirement.
This addition allows analysts to control whether a class should be considered for Dynamic Pricing not just by departure date, but also by the number of days prior to departure.
This feature captures the advance purchase restrictions associated with class fare conditions.
RTDP Reports
The RTDP reports screen, also known as Business Analytics, provides insights into the volume of traffic coming through RTDP.
Before
The reports presented data aggregated at the month level, which caused issues in presenting and ranking the results.
After
Now, data is aggregated at the day (and potentially the hour) level, allowing for more fine-tuned analysis. Airlines can see specifically which channels are abusers. The way we process and store data also allows for better ranking and filtering of the data.
Transformed Fare Cleanup
In the last release, we discussed how RTDP can handle cases when WTP is turned off in RM.
As a follow-up, we have added functionality to selectively remove Transformed Fares (TFs) from RTDP databases by OD.Previously, this removal process was an all-or-nothing deal. This update allows for more precise and targeted cleanup.
Cascading POC
Some Cascading partners were previously not calculating POC correctly, especially when JD was involved.
PROS has now implemented a solution to calculate the POC information accurately and include it in the cascading message as part of the POC line. This information is provided even if the original request does not include a POC line.
This feature requires configuration to turn on and is available for use with specified airline partners.
PROS Platform Travel Summer Release 2024 showcases a suite of innovative features and enhancements that are set to revolutionize the travel industry's approach to pricing and revenue management. From the streamlined creation of ancillary offers and AI-powered pricing solutions to advanced forecasting capabilities and improved offer marketing, these updates are designed to help airlines optimize their operations and maximize revenue. We invite you to explore these new features and leverage the PROS Platform to stay ahead in the competitive travel market.