How can we ensure our revenue management (RM) approach is optimized and automated?

At this time when traffic is down significantly from previous years, how can we ensure that we are open to capture potential bookings, at the same time capturing high-yield opportunity wherever it exists, and respond to competitive strategies with speed to market?.

One of the first steps would be to re-validate all the controls applied in the RM system. This current environment lends itself to stripping off any restricting controls and creating a new seat allocation strategy from scratch. It can be an enlightening experience seeing the RM system optimization with absolutely no controls on it.

I like the top-down approach where we apply high-level low-demand controls (if any are absolutely necessary) to the entire route and all flights. This approach ensures that if there are no other controls, the flights will be open, and we will be in a state of “readiness”.

If our demand and bookings are down year-over-year, can we influence our forecasted demand in the RM system, reducing it to levels relative to the current situation? Can we apply a monthly strategy looking forward? Typically, our advance booking reports are at a route level and by month, and they can tell us how much we are down. Lowering the forecasted demand also eliminates the need to force seats into lower classes using a minimum control. Forced controls do not allow the RM system to optimize your flights.

Low-demand controls are in effect maximum limitations for the seat protections in the lowest booking classes in the nested structure. If your RM system “dumps” seats that have no demand in the lowest booking classes, sometimes we need to set controls to establish a class seat allocation distribution. This would be important if we have a very low tactical fare level in the bottom booking class.

An example of this is where we might want only 10 percent of our economy cabin on a route to be allocated at a $69 fare. Because this seat distribution amount is usually established at the route level, we can place a maximum control on the route. A maximum control is important as it states “never more than” in a situation where excess capacity is dumped, but does not force seats on high demand flights where there should be less.

Okay, now the base is set, we can next categorize our flights and implement controls at the flight level, and only on prime, high, and medium flights, to capture willingness to pay, manage potential spill, and to minimize revenue dilution on business flights.

High-yield spill (on business flights) can be corrected by applying minimum controls on last minute high-end booking classes. Low-yield spill (on leisure flights) can be corrected with up-sell controls on the lowest booking classes.

Preventing revenue dilution typically means protecting enough business related high-yield seats for the last-minute booking passenger. This entails applying minimum controls on the business booking classes to ensure availability. These minimum controls state “never less than” in a situation where we want a specific number or more seats kept.

If we conduct weekly flight categorization analysis and evaluation based on current trends and patterns, we can manage these controls quite nicely. Monitoring and adjusting our fare levels and allocation distribution according to revenue targets and competitive strategies is also very manageable with high level route controls.

I’d be very interested in hearing your comments, ideas, and/or questions.