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Dynamic offer generation in airline revenue management
Journal of Revenue and Pricing Management ( IF 1.1 ) Pub Date : 2021-07-06 , DOI: 10.1057/s41272-021-00349-4
Kevin K. Wang 1 , Michael D. Wittman 2 , Adam Bockelie 3
Affiliation  

The New Distribution Capability and new retailing platforms will enable airlines to respond to shopping requests with bundled offers of flights and ancillary services, representing an evolution from traditional, flight-focused optimization. Assembling an attractive set of offers to display to customers therefore represents a new joint pricing and assortment optimization problem in airline revenue management. In this paper, we introduce an initial optimization approach for the selection and pricing of a la carte and bundled flight and ancillary offers. First, we propose a customer choice model that captures the impact of ancillary bundles on flight itinerary choice. We then calculate prices for each offer from a continuous range of price points and display the offer set that maximizes expected revenue for a given customer segment. We illustrate the approach using a single-flight, single-ancillary base case and discuss extensions to more complex environments. Tests in the Passenger Origin–Destination Simulator (PODS) show that dynamic offer generation (DOG) can increase net revenue when used by one or more airlines in a competitive network, assuming that the airlines are able to accurately segment incoming requests and estimate the average willingness-to-pay of each segment. We find that the majority of the revenue gains of DOG are due to competitive effects from the dynamic pricing of the flight component of the offer. The bundling mechanism of DOG is a secondary source of revenue gain that can be realized when customers take bundled ancillary services into account when choosing the flight. Our results provide insight for practitioners that are implementing offer optimization systems and processes. For example, in line with the previous literature on bundle pricing, we find that in transparent distribution channels an ancillary service should be bundled with the flight when the valuation for the ancillary is high or when its marginal cost of provision is low. We close by discussing the strategic and managerial implications of a move from traditional distribution strategies to a next-generation, offer-focused approach.



中文翻译:

航空公司收入管理中的动态报价生成

新的分销能力和新的零售平台将使航空公司能够通过捆绑提供航班和辅助服务来响应购物请求,这代表了以航班为中心的传统优化的演变。因此,将一组有吸引力的优惠组合起来展示给客户代表了航空公司收入管理中一个新的联合定价和分类优化问题。在本文中,我们介绍了一种用于点菜选择和定价的初始优化方法以及捆绑航班和辅助服务。首先,我们提出了一个客户选择模型,该模型捕捉了辅助包对航班行程选择的影响。然后,我们从连续的价格点范围内计算每个报价的价格,并显示使给定客户群的预期收入最大化的报价集。我们使用单次飞行、单辅助基本案例来说明该方法,并讨论对更复杂环境的扩展。乘客始发地-目的地模拟器 (PODS) 中的测试表明,如果一家或多家航空公司在竞争网络中使用动态报价生成 (DOG) 可以增加净收入,前提是航空公司能够准确地细分传入请求并估计平均值各细分市场的支付意愿。我们发现 DOG 的大部分收入收益是由于报价的航班部分的动态定价产生的竞争效应。DOG的捆绑机制是客户在选择航班时将捆绑的辅助服务考虑在内时可以实现的第二次收入收益来源。我们的结果为实施报价优化系统和流程的从业者提供了见解。例如,与先前关于捆绑定价的文献一致,我们发现在透明的分销渠道中,当辅助服务的估值较高或提供的边际成本较低时,应将辅助服务与航班捆绑在一起。我们最后讨论了从传统分销战略转向下一代的战略和管理影响,

更新日期:2021-07-06
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