Revenue Management The origin of Revenue Management Roberto Alvarez López Rooms Division Management...
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Transcript of Revenue Management The origin of Revenue Management Roberto Alvarez López Rooms Division Management...
Revenue Management
The origin of Revenue Management
Roberto Alvarez López
Rooms Division Management
July 2010
Revenue Management
The airline Industry in the 70’s
The airlines offered standard prices
If you find the same prices for the same product…
How do you pick your choice?
Where did RM come from?
Revenue ManagementWhich flight would you prefer?
Revenue ManagementBut…
1978 Airline deregulation act
New airlines, new competition, lower prices, and a better market for consumers
Lower labort costs, simpler operations= Prices much lower than the majors
Revenue ManagementLower prices = new and vast market segment:
PRICE-SENSITIVE TRAVELERS
Revenue Management
VS
Price-sensitive travelers left, bussiness travelers stayed
=
Low cost airlines Larger airlines
Revenue ManagementThe people switched from driving to
flying
‘s goal…
Bring the price-sensitive travelers back
Compete by using the same fares?
How?
Revenue Management
Robert CrandallChairman of AA
We must compete by using our surplus seats!
We will set lower prices on the seats that
are usually empty
But there´s a problem…
Ensure that business costumers don’t switch and
buy low cost seats
How to do it?
Revenue Management
Purchase restrictions :30 days in advance of departure
Non refundable
Capacity-controlled fares:AA limited the number of discount seats sold on each
flight
Revenue Management
We must control the way we sell tickets
• 1978. American Super Saver Fares
•AA was able to match or undercut the lowest fares on the market
Revenue Management
What was the effect?
People Express had a loss of over $160 million by 1986, went bankrupt and was sold to Continental Airlines.