Carlos Triana,
Instructor
RM Level Two - Implementing and Managing Seat Allocation Strategies
This program is targeted at established passenger carriers, or start-ups seeking help in positioning themselves in the market, in order to better maximize revenues. Whether your company is a low fare, a legacy, or a niche carrier, our experts will offer support by reviewing your existing RM and pricing processes, determining along with your team how to realign your strategies within your competitive position. All through this program, we will work closely with other critical areas such as capacity planning, scheduling, marketing and distribution (sales) to facilitate the process and achieve the best results.
This course will provide you with a general introduction to revenue management strategy and business processes. The training manual is an electronic Adobe Acrobat PDF file, 122 pages, and in color. The manual can be downloaded and printed, or viewed from our online learning center. Module related powerpoint presentations and comprehension assignments are included.
Relevant articles, papers, and presentations, have been collected and are available from our online learning centre, to enhance the learning experience, and provide real-life examples and case studies.
A highly qualified instructor will be assigned to guide the participant throughout the duration of the course. The instructor will provide feedback on each comprehension assignment as well as the final assignment paper. Please note that all our instructors possess current practical working experience in Revenue Management.
This course is available in customized versions for the PROS RM system and Lufthansa Systems ProfitLine Yield Rembrandt RM system.
Passenger transportation is a service industry that offers its consumers a perishable commodity, since at departure, all seats left empty loose their value. Maximum revenue gains can be captured from a departure if all seats are sold for and all demand for last minute full-fare seats is met. To succeed and achieve such a goal, carriers must not only forecast passenger demand accurately, but must also implement and manage daily a seat allocation strategy in order to optimize price availability, and react quickly to competitive and economic changes.
The process for determining and managing seat allocations is illustrated in the process map below:
Initial Allocation Strategy & Flight Categorization
With the release of a major seasonal departure schedule change, usually twice a year, an initial seat allocation exercise is performed for each scheduled departure. First, historical data, such as passenger demand per booking class, historical schedule, no-show rates, fares and competitive data are compiled, along with data about planned departures, such as a new schedule, change in fares, change in competition's schedule and fares, corporate guidelines and economic assumptions. Data is then analysed to evaluate the impact on historical demand and determine the new expected demand.
Any significant changes in anticipated passenger demand that might be of interest to pricing, scheduling or advertising departments can be flagged for discussion of action strategies. Flights can be clustered or categorized into groups with similar patterns of demand and passenger mix.
With the evaluation documentation and departure categories, an initial booking class allocation strategy can be determined. This process is labour intensive, but is key to achieving an accurate demand forecast and therefore an optimal seat allocation.
Data Calibration and System Generated Forecast & Allocations
The first half of the course deals with the manual process of determining initial seat allocations. However, to maintain optimal allocations and adjusting overbooking levels as bookings are generated becomes an impossible manual task. A revenue management system takes historical data and current booking levels to recalculate a demand forecast in order to determine the new optimal seat allocations until the day of departure. One of the main system set-up activities is the calibration of historical data: In general, demand follows a seasonal pattern, and therefore peak and non-peak periods must be defined.
Holidays and special events have unique demand patterns of a much shorter nature, and therefore these events must have their own historical data pools. Should demand patterns be expected to change in the future, the historical data pools must be redefined.
Any expected demand change, calculated in the previous section, that cannot be captured by the system must be fed into the system in order to accurately forecast future demand. Once data is calibrated and demand is influenced, the system then calculates the new initial allocations which are compared to the initial allocations manually calculated. Any major differences are the result of allocation influences which need to be reviewed.
The process of influencing demand and allocations can also be on-going, triggered by market reviews that highlight schedule and fare changes, both for the airline and the competition's, and flight performance. Special events, opportunities and risks are also triggers.
System Generated Forecast and the Booking Cycle
The system demand forecast depends on analysis of enormous quantities of historical and current booking data. Given this data, the system chooses the forecasting method that generates the most accurate forecast of demand at the booking class level.
The forecasting process is repeated each time new booking data is received. In this section, we will look at the booking cycle and how the booking curve is redrawn each time new bookings are received or the forecast is recalculated.
System Skill Requirements, Tasks, Priorities & Workload
The skill requirements specific to demand forecasting and allocation strategies are described along with the major activities that should be carried out by revenue management as their tasks and priorities. These tasks should be scheduled and prioritized according to their importance for revenue maximization.