Dynamic pricing – The next revolution in RM?

Thomas Fiig (), Oriana Goyons, Robin Adelving and Barry Smith
Additional contact information
Thomas Fiig: Amadeus Airline IT
Oriana Goyons: Amadeus Airline IT, Amadeus S.A.S.
Robin Adelving: Amadeus Airline IT, Amadeus S.A.S.
Barry Smith: Barry C Smith LLC

Journal of Revenue and Pricing Management, 2016, vol. 15, issue 5, No 5, 360-379

Abstract: Abstract Existing revenue management systems (RMS) base their recommendations on historic observations and do not explicitly consider competition. This means that RMS recommendations often are not appropriate for real-time competitive situations. Dynamic pricing (DP) is an extension of RMS that dynamically calculates the optimal price, taking into account the airline’s strategy, customer-specific information and real-time alternative offerings. By optimizing the contribution within the shopping session, DP has a more current and detailed view of demand and can improve RMS performance. We investigated the performance of DP using two simulators, Altéa Benchmarking Engine and Passenger Origin Destination Simulator and demonstrate that DP can deliver substantial revenue benefits with no modification to existing revenue management (RM) processes. However, the deployment of DP into the airline distribution process will be a challenge, because it affects all shopping and downstream processes, such as ticketing, servicing, revenue accounting, RM and interline settlement, that rely on information from existing fare aggregators. Nevertheless, the potential benefits of DP are so compelling that we believe the effort to bring this technology into practice is warranted.

Keywords: dynamic pricing (DP); distribution; revenue management system (RMS); global distribution systems (GDS); Passenger Origin Destination Simulator (PODS); Altéa Benchmarking Engine (ABE) (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://link.springer.com/10.1057/rpm.2016.28 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:jorapm:v:15:y:2016:i:5:d:10.1057_rpm.2016.28

Ordering information: This journal article can be ordered from
https://www.palgrave.com/gp/journal/41272

DOI: 10.1057/rpm.2016.28

Access Statistics for this article

Journal of Revenue and Pricing Management is currently edited by Ian Yeoman

More articles in Journal of Revenue and Pricing Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().