October 2018, Las Vegas
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Consider this: airlines need to rethink the travel funnel to sell more
Analysts are increasingly interested in what travellers buy after they have booked their flight but what about the pre-purchase consideration phase? Tom Bacon takes a look
Airline revenue management has historically focused on bookings – that is, flight purchases. Bookings form the basis for the huge databases upon which demand forecasts – by fare class, by flight, by day – are developed. A multiyear booking database is used to form the models that allocate seats on a flight across the range of fares. In general, RM is not involved with other steps in the travel purchase funnel, although as ancillary fees have grown, analysts are increasingly interested in what customers buy after they have purchased their flight. We’re talking, of course, bag fees, change fees, seat assignments, lounge access, onboard amenities, car rentals and hotel stays, which may add to a customer’s total revenue.
But what about ‘consideration’, the pre-purchase phase in the travel funnel? At Frontier Airlines we were very interested in this important phase. For customers who used our website, we were able to track the purchase funnel via the web interface created by Datalex, including abandonment at each step. This was used mostly to ensure the booking process was simple enough – particularly given the increased number of options we offered, both in ancillary choices and rebundled fares.
Although most airlines do now track abandonment and conversion, the information is still used more to improve web design and the booking process, rather than to directly impact pricing and RM
We tracked abandonment after the initial search as well as abandonment at various stages during the purchase process (passenger identification, payment request). Although most airlines do now track abandonment and conversion, the information is still used more to improve web design and the booking process, rather than to directly impact pricing and revenue management.
Search volumes also add complexity to booking analysis; search volumes dwarf booking volumes. Search-to-bookings can be greater than a hundred to one as shopping has become a habit for many travellers; increasingly they seek not just the best flight alternative but also the best channel. There is a lot of noise in search volumes including the dreamers who will never travel or price sensitive travellers who search multiple times a day for weeks before they ever actually book. RM’s goal in the consideration phase has historically simply been to ensure pricing is competitive so as to maintain purchase (booking) volumes.
Search-to-bookings can be greater than a hundred to one as shopping has become a habit for many travellers
JetBlue talks of incorporating consideration (search) more directly in the revenue management process. JetBlue’s Technology Ventures Group has invested in FLYR Labs, a travel start-up, that analyses search data focused on improving revenue management. It explicitly extends RM analysis and forecasting to the consideration phase. FLYR refines RM demand forecasts by analysing bookings versus searches, and monitors search activity for signs that booking trends may change; when it detects a major shift it automatically links to new demand forecasts in the RM system. FLYR analysis also provides new insight into customer price elasticity – the impact of pricing on the expectation that a search will turn into a booking. Finally, FLYR incorporates third-party activity into its analysis of ‘consideration’. Third-party activity, of course, includes competitive offerings in customers’ purchase decisions.
‘Conversions’, that crucial step of turning consideration into purchase, is the Holy Grail for travel merchandisers. Only by analysing this phase can suppliers properly forecast true demand for their products and tailor their price and offerings accordingly. FLYR Labs offers new transparency and analytical frameworks for tracking and optimising conversions – and for incorporating learnings into RM. All airlines need to review their approach to the travel funnel. They can further improve revenue management and drive more total revenue by applying enhanced analytics to the consideration phase.
Tom Bacon has been in the business 25 years, as an airline veteran and now industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Questions? Email Tom or visit his website