Big Data - Why you pay more than your neighbor on a plane...

Next to consumer goods and financial institutions the travel industry sits on one of the largest data repositories regarding customer information and number of transactions. In addition, it is one of the most flexible and complex industries since prices and in parts capacity can be adjusted on a real-time basis to balance supply and demand. Moreover, we all know that marginal costs for an empty room or seat on an airplane are low for the company and that an unsold spot is a forgone revenue opportunity.

Key to manage these complexity and to exploit all revenue opportunities is therefore to have up-to-date information systems that not only present isolated information about an individual customer, but rather integrate information across all important data sources and allow to derive superior insights and strategies. Potential data sources in the travel industry could be market share and pricing information of competitors, capacity information as well as current and historic transaction information. By combining all this information valuable insights can be created and concrete recommendations and trends being derived automatically by the system to maximize revenue. Having such systems in place radically changes the needed skill profile of your employees though, which becomes significantly more analytical and shifts to making tactical and strategic decisions rather than executing rule-based pricing. Companies need to adjust for these changes and train their employees accordingly as well as giving them the needed level of freedom and responsibility to act in such an environment where static rules do not work. The Pricing Manager eventually becomes a trader that takes calculated risks on a daily basis.

In addition, all the information helps the companies to better understand their customers and to create new product offerings that differentiate them from competition and help to win market share. An example for this can be hourly pricing based on check-in and check-out times, but also product bundles that increase the convenience of booking for the customer. By analyzing the booking pattern of customers companies can even try to derive the willingness to pay of certain customers and start customer-specific pricing strategies throughout the booking process, which is quite powerful in combination with loyalty programs that provide additional transparency about the customer’s travel behaviors.

Big Data is therefore extremely valuable for the entire travel industry and companies should be on their toes to early adopt and take advantage of this new field of data analytics.