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What We’ve Learned From Airlines During the Pandemic

September 10, 2020

We've learned a thing or two from airlines during the pandemic and wanted to share our insights with you...

The Story

The Wall Street Journal recently released an article about how the airline industry’s revenue management strategy is failing due to its reliance on historical data. In the vacation rental industry, we see the same full reliance on historical data, which can result in over- and under-pricing.

Here at Beyond Pricing, we believe that historical data is just one component to consider - but the more important data comes from forward-looking occupancy (also known as demand). By considering both the past and future, our customers are in the best position to price accurately and confidently during unprecedented times.

The Problem With Historical Data

Airlines are struggling to manage rates during the pandemic because their pricing strategy is driven by historical data. Airline revenue managers rely on past booking rates and demand curves to set their future pricing, and as a result, their algorithms are pricing future bookings inaccurately.

This approach is problematic because it cannot account for the impact of a pandemic on the factors that led to previous years’ performance. There’s simply no data on how a pandemic of this magnitude impacts demand, booking patterns, or how they deflate the value of the product. We all know it is negative but have no way to tell just how negative.

Due to historical data, the airline industry’s algorithms are pricing its available inventory with rates at pre-pandemic levels, resulting in a slowed booking pace and a negative impact on revenue. They’ve found that their old strategies and tools are no longer meeting their needs. A particularly striking quote from WSJ’s findings states that airline revenue managers "are doing a lot of manual pricing and essentially pricing every flight as if it were a brand new route with no historical data.”

As our customers know, manual pricing is an inefficient and inaccurate way to run their business. It requires a significant amount of time to implement and is incapable of responding to changes in demand or market conditions quickly.

At times like these, property managers need the confidence that they are getting the best possible revenue outcomes when every dollar counts. Now airlines are scrambling to adjust their strategy to be based more on forward-looking factors.

As you can see, it’s imperative to use a forward-looking, demand-based pricing strategy to power your business, which is exactly what we’ve done at Beyond Pricing.

How We Are Different

Our pricing philosophy is based on forward-looking occupancy, which makes our pricing recommendations responsive to sudden changes in market occupancy. When we see bookings occur for a given day, our pricing will begin to increase proportionally to the demand we see in the market. This means we are not setting our rates arbitrarily too high because of historical data and missing out on bookings we could have gotten if we were more competitive.

One thing to note: we still value historical data and see it as a key to our decision making. However, it is not the backbone of our pricing strategy but rather a reference point we use when analyzing whether a property is set up for success or is performing up to par.

Our strategy puts our customers in the best position to perform in unprecedented times.

Make sure you’re doing all that you can to maximize your revenue. Get started by creating a free account and begin syncing your listings today!

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