Interesting revenue management

 
Old May 18, 09, 3:09 pm
  #1  
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Interesting revenue management

Booking myself & 3 colleagues from EWR-PVG first of June. Need 4 BF tickets. Thought I could get the sale fare which is around $3400 but I guess there is an advance purchase so too close.

Instead ended up booking 4 economy tickets & using miles to upgrade. TONS of seats and dates available. Each ticket cost with the upgrades...$1800.

So CO gets $7200 when they could have reaped $13,600. We use copany miles to upgrade unless the BF tickets are not too astronomical.

Seems strange to have so many upgrade seats available but not the discounted BF tickets.

Just an observation.
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Old May 18, 09, 3:16 pm
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Originally Posted by TMOTEE View Post
So CO gets $7200 when they could have reaped $13,600. We use copany miles to upgrade unless the BF tickets are not too astronomical.
So what? CO got $1,800 from you when you're tipping point was about $3,400.

Meanwhile, the other people paying the $7,000 fares may be paying them. If they offered you the $3,400 fare, they'd have to offer everyone else the $3,400 fare, essentially losing $3,600 from every other person who would have paid $7,000.

If you look at any instance individually there are things that could have been optimized differently. The problem is they're selling the inventory as a whole.

Just like when you go to a store and something's on sale. Had you intended to buy it anyway, the store could've made more from you. However, they would have lost all the other customers who would not have been willing to pay full ticket.

Last edited by channa; May 18, 09 at 3:54 pm
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Old May 18, 09, 3:42 pm
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Value of the Miles

You are not factoring in the value of the miles. While these may not add up to the difference between what you purchased and the discount BF fare you wanted, they must still be accounted for.
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Old May 18, 09, 3:49 pm
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Originally Posted by TMOTEE View Post
Just an observation.
As channa points out, it's really not that "interesting" of an observation.
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Old May 18, 09, 3:51 pm
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no doubt CO would rather people 'blow' their miles on copay+upgrade than partner heavy RTW trips as well. So opening award inventory for this purpose is a win win for them.
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Old May 18, 09, 4:39 pm
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Originally Posted by channa View Post
Meanwhile, the other people paying the $7,000 fares may be paying them. If they offered you the $3,400 fare, they'd have to offer everyone else the $3,400 fare, essentially losing $3,600 from every other person who would have paid $7,000.
Not necessarily. BF sale fares come with lots of restrictions on advance purchase, minimum stay and no changes that full fare J ticket buyers can't or won't meet.
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Old May 18, 09, 5:31 pm
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These are normal responses for abnormal times. I wonder how many people are actually paying the $7,000 fares now?
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Old May 18, 09, 7:00 pm
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Originally Posted by JetAway View Post
These are normal responses for abnormal times. I wonder how many people are actually paying the $7,000 fares now?
I agree. If push came to shove we would have bought the J fare. But of course we are trying to save whenever possible. We would have jumped at the $3400 fare and saved the miles for another time.

Perhaps my observation was not that "interesting". I was just pointing out an instance where CO is offering a sale in BF. Granted there are restrictions, advance purchase etc. But in these time I would think CO would want to maximize revenue where ever possible.

Perhaps the reason I was able to get upgrade seats quite easily on a new route is business travel is down. In the past trying to use miles for upgrade was not that easy to Asia. Also on some days the seat map was wide open. Of course that does not mean seats are unsold but it could be an indication.

I did not mean to start anything. Just bringing up my situation. I am pleased to have the Shanghai route. It will cut off about 5 hours of travel time instead of going through Beijing.
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Old May 18, 09, 9:12 pm
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Arrow $$$ ???

What was the total cost of a ticket?

$XXX coach tix
$YYY upgrade fee
ZZZ FF miles at 1 cents to 1.5 cents each = $TTT
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Old May 19, 09, 12:28 am
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Originally Posted by sobay_terp View Post
Not necessarily. BF sale fares come with lots of restrictions on advance purchase, minimum stay and no changes that full fare J ticket buyers can't or won't meet.
Sometimes they can't/won't, and sometimes they can/will. CO's revenue management has decided that it doesn't want to offer a $3,400 business class ticket less than two weeks in advance, because it believes, on the whole, that it will make more money by requiring those that can't purchase their tickets any further in advance to buy a much more expensive ticket.

By the way, the cheapest business class fare I see for EWR-PVG in June is $4100 + tax, but it has a 50 day advance purchase requirement and a 10 day minimum stay. If you can't meet those restrictions, you're looking at $6,500+.
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Old May 19, 09, 12:45 am
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Originally Posted by TMOTEE View Post
I agree. If push came to shove we would have bought the J fare. But of course we are trying to save whenever possible. We would have jumped at the $3400 fare and saved the miles for another time.

Perhaps my observation was not that "interesting". I was just pointing out an instance where CO is offering a sale in BF. Granted there are restrictions, advance purchase etc. But in these time I would think CO would want to maximize revenue where ever possible.

Perhaps the reason I was able to get upgrade seats quite easily on a new route is business travel is down. In the past trying to use miles for upgrade was not that easy to Asia. Also on some days the seat map was wide open. Of course that does not mean seats are unsold but it could be an indication.

I did not mean to start anything. Just bringing up my situation. I am pleased to have the Shanghai route. It will cut off about 5 hours of travel time instead of going through Beijing.
channa intelligently addressed your comments. CO thinks it is maximizing revenue with its pricing policy. Business travelers who can buy $7000 J tickets will do so. They will also buy $3400 tickets in J. They will not buy coach tickets and use miles to upgrade when their business will pay for J outright. CO knows this and prices accordingly.
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Old May 19, 09, 7:19 am
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Originally Posted by Colin View Post
channa intelligently addressed your comments. CO thinks it is maximizing revenue with its pricing policy. Business travelers who can buy $7000 J tickets will do so. They will also buy $3400 tickets in J. They will not buy coach tickets and use miles to upgrade when their business will pay for J outright. CO knows this and prices accordingly.
I can see your point. This was indeed the case for my company in the past. But now if possible to use miles to upgrade we do it. Moving trips around a day or two, going to PEK and then taking a connecting flight etc.

Times have changed.

I guess I started this post because I thought it was strange that 2 weeks before the flight there were so many upgrade seats available at a lower ticket price when we would have paid more for the BF ticket. Usually this close to travel date the BF cabin might be almost sold out and all that is available is full J but this is obviously not the case.
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Old May 19, 09, 8:19 am
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Originally Posted by TMOTEE View Post
I guess I started this post because I thought it was strange that 2 weeks before the flight there were so many upgrade seats available at a lower ticket price when we would have paid more for the BF ticket. Usually this close to travel date the BF cabin might be almost sold out and all that is available is full J but this is obviously not the case.
Very few companies have pools up miles for upgrades so I think that you are in the minority of being able to take such an approach. And the flights to Asia are long enough that most companies will still pay for BF. So CO has chosen to not erode their chances of the high revenue pax at the expense of the discounted BF offer.
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Old May 19, 09, 8:29 am
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Originally Posted by TMOTEE View Post
I guess I started this post because I thought it was strange that 2 weeks before the flight there were so many upgrade seats available at a lower ticket price when we would have paid more for the BF ticket. Usually this close to travel date the BF cabin might be almost sold out and all that is available is full J but this is obviously not the case.
Again, we're not privy to the numbers.

Just because there is inventory doesn't mean discounting is in order. If there are 30 seats available, and a $3,400 price would sell all 30 of them, maybe a $7,000 price would sell 15 of them, meanwhile allowing CO to oversell Y by 15 additional seats (let's call those $1,500 seats). Some of those Y tickets may upgrade (copay $), and others will get op-upped.

Just an example, there are many ways it can work out, but we don't know the behind-the-scenes numbers, so it's not a fair assumption to say CO should discount these.
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Old May 19, 09, 9:11 am
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We also don't know how many of the "$7000" tickets are selling but most secondary sources (news reports, annual reports, WSJ, etc.) indicate few, if any.
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