Many travel agencies collect torrents of potentially useful data with every intention of doing something with it, like optimizing their revenue. Unfortunately, with organizational silos, gaps in data collection and an absence of internal expertise, this often fails to happen. Agencies can start small with what’s already at their fingertips. Layers of data collected from normal day-to-day operations is a proverbial gold mine in the hands of the agency disciplined enough to take advantage of it.
The process begins with pure transaction data, where a wealth of information is generated by shopping, booking and ticketing air travel. If leveraged the right way, this transactional data can deliver insights into customer conversions and inform what actions could be taken to improve those conversion rates.
Other external sources of data provide rich information an agency can use to stay competitive such as GDS market share data (commonly known as MIDT data), data from clearinghouses like ARC and BSP, or data from a GDS like Sabre. For example, MIDT data includes actual market share information from carriers the agency partners with.
Collected daily, MIDT data can help agencies understand how much market share each carrier captures in each market, allowing for smart decisions around what mix of carrier content to sell. From ARC, useful data includes information derived from ticketing, such as front-end commission revenue and main sources of agent debit memos (ADMs). A GDS like Sabre gives you a more complete picture with both booking and ticketing data, useful for gauging markup performance and benchmarking conversion performance against other agencies in the marketplace anonymously.
The promise of harnessing data
Data useful to travel agencies is large and highly complex, making any notion of turning it into actionable insight an obvious challenge. Given the challenges many agencies have with finding resources — human or financial — to make this happen, the task might feel impossible. Being insights-driven is very achievable for agencies willing to try, and the business upside is enormous for those that succeed. A 2016 Forrester report declared the existence of a new type of company — what Forrester referred to as the insights-driven business — a company that gains competitive advantage by systematically translating data into insights. By Forrester’s estimate, insights-driven companies will grow eight times faster than the global GDP by optimizing their services and revenue. You have the opportunity to join this elite group.
Today, forward-thinking agencies are combining MIDT, ticketing, booking and other data to help track performance and pivot their business decisions accordingly. Nevertheless, even the savviest agencies will readily admit they are challenged to have a single source of truth from which to harness data and turn it into revenue-optimizing action in real time.
The possibilities are endless
The potential for improvement is great. Take the example of optimizing commission override revenue. To do this well requires a consolidated view of contract terms and corresponding override conditions across dozens or potentially hundreds of airline contracts. It also requires MIDT and fair market share data to better understand different carriers’ share of any given market. This, in turn, can help an agency identify the carrier mix that provides the best service to their customers while simultaneously achieving the optimal override revenue.
Solving this problem today requires not only integration and maintenance of multiple complex data sources but also the creation of highly accurate, flexible and on-demand reporting on top of those data sources. However, creating reporting to track the performance is only half of the battle. To maximize results, it’s necessary to layer predictive capabilities on top of these data sources and reporting. Only when an agency is able to understand where the market is going to be in the next one to three months will it feel in control of its own financial future. With the right analytics in place, agencies won’t be limited to just seeing past performance, but should be able to predict future performance more accurately.
Another key revenue area to optimize is deciding the right markup. With the appropriate data and analytics, agencies can quickly analyze markup rules applied to different fare basis codes and compare the resulting selling levels to market rates to see where markups are falling short. With this insight, agencies should be able to take action to adjust markups accordingly to maximize revenue. This is a particularly difficult problem to tackle, especially on a larger scale.
A substantial number of agencies decide to shy away from this problem due to its complexity. One reason it is so complex is that it involves bringing together multiple data sources such as shopping, availability and ticketing in such a way to be able to easily and accurately identify increased revenue opportunities. Generating timely, intelligent markup rule recommendations before the market conditions they were based on change also adds to the complexity. Solving this dynamic pricing puzzle in real time is the pinnacle of managing markup revenue. There is a gold pot at the end of the rainbow waiting for agencies that are able to achieve it in the future.
Ultimately, having robust data and insights offers agencies the possibility to choose their optimal revenue mix, both at a high level and transaction by transaction. In any given market, an agency has multiple revenue types at play. Weighing the most lucrative trade-off between your markups, fees, commissions or any combination thereof is the holy grail of optimization, but also extremely difficult.
An example of this is allowing for a smaller markup in the presence of an override commission, leaving a lower price for the customer but the same or larger value extracted for the business. Today, this can be done at the highest level when setting revenue strategy and requires coordination between all revenue areas. But in the not-too-distant future, this could become a dynamic process where trade-offs can be resolved in real time.
Taking advantage of the promise of data in optimizing revenue should be a critical priority for every agency, not just to stay competitive, but also to capture more revenue than ever before.