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Delivering Offer Optimization with Dynamic Offer Creation and Distribution

On the journey to Offer and Orders airlines of all sizes are adopting offer optimization strategies – dynamic pricing for the right to fly and for optional services via dynamic ancillary bundling. But how do you bring offer optimization to life and deliver it consistently across distribution channels? In this panel airline experts Srikanth Ranganathan, Senior Vice President Travel at PROS, Catherine Silva, strategic consultant at PROS, Janine Hoerburger in Distribution solutions at LHG, Pavlos Sarkas, IT manager at Cyprus Airways, and Chrysanni Michael, head of PSS at Cyprus Airways, discuss different paths and best practices for airline-led offer creation and distribution.

Full transcript

Srikanth Ranganathan: So, we are going to discuss the delivering offer optimization with dynamic offer creation and distribution. So, if you look back, the way this whole dynamic offer started, it started off in 2002 in terms of how we were dynamically pricing the product and how we are selling. But as the industry has evolved with the proliferation of NDC and other things that's been coming up, the airlines are embarking on this journey of dynamic offer creation. Now, the journey has just begun for a lot of airlines.

Srikanth Ranganathan: Some of them are in different steps of this journey. Some of them have taken a couple of steps there ahead of it. Some of them are just starting. So, in this whole Outperform conference, you'll hear different airlines sharing their experience in terms of where they are in this journey, what they want it to do, and what they ant to accomplish. So, with me in this panel discussion, I have a couple of my colleagues from the industry who would like to share their thought in terms of where we are and what we are seeing in the marketplace, how each one is traveling in this part of it. So, with that, I'd like to introduce the panel starting with myself. I'm Srikanth Ranganathan, I'm Senior Vice President Travel. I've been with PROS for 24 years now, 23 years now, wearing different hats within PROS. ...

Cat Silva: Hi. Okay. Hi. My name is Catherine Silva. I'm also with PROS since one year and a few months. I'm a strategic consultant and I've been in the industry since I turned five years old, so I've been for a while with the industry.

[laughter]

Janine Hoerburger: Good afternoon. My name is Janine Hoerburger. I'm working for Swiss and subsequently Lufthansa Group. I'm in Distribution solutions. I forgot it quickly. [laughter] And the team is managing all the B2B direct distribution solutions for Lufthansa Group, which is namely NDC APIs, touristic Landscape and Shopping Solutions. And one of my main focus points is shopping solutions towards our meta searchers. And I'm also since quite a while in the industry.

Chrysanni Michael: Hello everyone. My name is Chrysanni Michael. I'm from Cyprus Airways. Initially I started with a company as an RM analyst, and then I moved as head of PSS in handling our eCommerce solutions and distribution channels.

Pavlos Sarkas: Hi, I am Pavlos Sarkas of Cyprus Airways. I'm the IT manager in charge of implementing and managing the IT solutions within the company. And yeah.

Srikanth Ranganathan: Okay, good. I think I'm going to start off with you Cat. In this role at PROS, we have worked with different airlines, and you also participated in a significant number of RFPs that's come out especially since every airline is starting off in this journey of offer optimization. So, the first step in offer optimization is offer creation. For any airline to start that off, they have to create an offer, and be it for their own markets or for their own channels as airline.com or through the NDC channels like the OTAs and others. Can you walk through some of the experience that you have seen in terms of what the key milestones are for the airlines or what they should be looking at as they embark on this journey?

Cat Silva: Sure. So, it really depends a lot of which airlines we are talking with because every airline has different landscapes, different complexities. They are... They also in business objectives are different and they have different ways of envisioning their path to this offer optimization. But in general, a lot of the airlines are trying to start their journey on the offer optimization by looking on how bring dynamicity to their prices, for example. So how can they optimize the price in that area?

Cat Silva: Some of them are starting the journey of, let me expand first how I and distribute my offers across the channel so I can have rigid content being distributed so that therefore I can optimize better the content. So, there is a lot of different ways of starting but overall, I think there is, a one thing is clear is that the airlines are looking definitely on how they can optimize and how they can bring their optimization to the way they distribute their offers, that's for sure. What do you think?

Janine Hoerburger: Thank you for that question. Before I deep dive into our journey let me elaborate a little bit on the definition of own channels because I find it very important. We always talking about offer control or retail control, and that is for me, what makes a own channel being an own channel. So, it's not only a B2C channel where, which is an own channel for us or for Lufthansa group, but it's also any other B2B channel which we actually own or where we have offer control.

Janine Hoerburger: I think this is very relevant especially in the B2B area for the entire experience and for the adoption. Having said that, of course it's a journey and this journey is not over yet. We have only started it, maybe some have started earlier, some later. But what is really good that after years of let's say GDS oligopoly and full content agreements and legacy dependencies, finally regaining back offer control or retail control is really an enabler or a door opener to really do offer optimization.

Chrysanni Michael: For us is, we are currently using PROS Shopping Tool Repricer. And however, for us, the last year it was a transition period to move to a new IBE to improve our Ecommerce and distribution channel. So, as a small airline we face a lot of challenges on how to offer dynamic prices to the market. Up until now, we were focusing on the B2B also, but we see that the market in general is transitioning... Is moving away also, not only to the fair fare prices, but also to the ancillary optimization, which is something that I see that is going to be the next thing that needs to give more attention and to generate more revenue on the site revenue.

Srikanth Ranganathan: So, to build on that, do you see a difference between how, for example, the merchandising part of it works versus the shopping and distribution side of it?

Chrysanni Michael: Of course. Even though for us at the moment we didn't fully utilize the shopping tool.

Srikanth Ranganathan: Right.

Chrysanni Michael: However, we see that the next step is to proceed also with the merchandising solution and the dynamic pricing on the ancillaries because it becomes more, you can offer more customized solutions and prices to the market based on the type of the passengers and how, each route has different requirements and needs. So, using that is going to be more useful.

Srikanth Ranganathan: Okay.

Pavlos Sarkas: Yes, I fully agree with my colleague. I mean, okay. We're new to PROS. We've just been for a year, and we already have enough products for the moment. It's a challenge for us to implement them also, being a small airline and we're just moving forward with this. But yeah, with the shopping solution and the connection we have with PROS and how they helped us the past year is amazing.

Pavlos Sarkas: So, we want to get approach the merchandising version after seeing Outperform, it’s our first Outperform. And throughout these days we saw that getting Offer Optimization and the merchandising implemented. It's very important for us. So going back, we'll focus on this and see to increase our revenue, because, at the end of the day, this is what every airline is here to do. Increase their sales.

Srikanth Ranganathan: So, since you have the mic, I'll just give you a follow up question on that. Right. So, in terms of the benefits of airline light led offer creation, right? There are multitude of it. Since both of you are both on the distribution and the PSS side of it, may I ask you to elaborate what you envision and I, and you mentioned that you're a smaller carrier, so people can, and we have customers here with small to large or an extra-large from a cost and revenue benefit wise, what do you see? And as a follow up question, Janine and I may ask you, what do you think from a customer experience side in terms of the benefits of offer creation, right?

Pavlos Sarkas: Yeah, I mean, we had to the number one thing is to reduce cost for us, reduce cost in the distribution cost, mainly efficiency. We really focus in on efficiency. Or we just launched our new IB a month ago. So, PROS being with us on this and having efficiency and keeping the customer on our website, it's really important to us. And this is the goal from my side.

Chrysanni Michael: Also before we implemented PROS solution, we had a lot of discrepancy on the prices and error, which ended up to hit a lot of low conversion rates on the website and everything. So, having a currency on the prices that you offer to the passenger, and actually do not push him to walk away before he finished his booking. We gained more control on how we distribute and who is hitting our prices. So, that having said, has reduced our cost, actually, our distribution and also, we try is our main focus now is to push more sales back to our direct sales channels and to get a little bit away from other GDSs. So, it was with respect to cost and efficiency was fully on it.

Srikanth Ranganathan: Okay. So, the way that I would, I would even rephrase to you, Janine, is like yesterday when we were sitting at a cab where the discussion was about understanding the offer creation where the airlines have multiple touch points with the customers during the journey. And one of the research, I saw was from an airline perspective back in the days, what you were exposed to is like where they sat and what kind of food they requested and what kind of special services they requested. Versus today you know a lot more about the customer when they travel. So, when you are creating this offer from a customer experience perspective, what do you foresee them taking benefit of that?

Janine Hoerburger: Allow me one step back, please.

Srikanth Ranganathan: Okay.

Janine Hoerburger: 'cause for me, when we talk about B2B distribution and offer optimization, the keyword here is adoption.

Srikanth Ranganathan: Right.

Janine Hoerburger: And especially in the B2B area, we have to drive, we as an airline, we have to drive this adoption else. We don't have our dear customers and partners sitting on our direct channels where we do offer optimization. So, I think that is really the key. And Offer Optimization is just one of many factors which, with which we can drive this adoption. So, when it comes to passenger experience or customer experience, I think there's many, many words, which were already said. It's very important how accurate the pricing or the offer or the dynamic offer is when it comes to what happens in between offer and order. So, there's a very, very thin red line on how accurate it is allowed to be or not, number one.

Janine Hoerburger: And number two, it's also creating trust. I think, if you create a very seamless end-to-end experience to the customer, and he realizes, he or she realizes that it's the best product, the most optimal product he can get from you, that creates trust, and he will come back and book with you again. And there was a third one, which I forgot right now.

Srikanth Ranganathan: Okay.

[laughter]

Srikanth Ranganathan: It's fine. No, that matters, right? In terms of when they're going into purchase and they have that experience and they see through the purchase journey, right? That's what is most important. And if you don't see that, then, so as you embark on it, you have to keep that in mind when you're implementing that.

Janine Hoerburger: Actually, the price, the offer and order is the first experience that the passenger gets when he's going on to proceed with his booking. So, if you fail on that, and I believe you lost almost, I would not say all of his trust, but at least 18% of it. So, it's very important on that point to be besides, to offer what you consider as an airline, a profitable price, and to hit your targets. The passenger needs actually to feel that during his first step to have his trip, the overall process was trusted and accurate. So, he trusts you before he even comes to on the day of his travel day. So, it's very important that one.

Srikanth Ranganathan: Good, good. So, let's talk about the offer optimization initiatives that your airlines specifically. What are some of the projects that you guys are working on right now across to make sure that the sales enablement is happening across all the channels?

Pavlos Sarkas: So, we just two other channels. We just signed off the offer market from EveryMundo. We're really looking forward to it, to really get us out there. Whatever we have the shopping solution and the enterprise, we're looking at merchandising, but more to follow.

Srikanth Ranganathan: Okay.

Janine Hoerburger: So, we started very early the process about continuous pricing. As you may know, I think we had the first implementations with some pilot customers on our NDC channels back in '19, early '19. And then we had like, really the big rollout of CP through our entire landscape in 2020, so in the middle of the pandemic.

Janine Hoerburger: So, I think from that perspective, we are already very much advanced because we were such an early enabler, so to say. But of course, that doesn't stop us from continuation. We have a lot of joint initiatives with PROS, but also joint initiatives within Lufthansa Group, mainly also coming from the science part in revenue management.

Janine Hoerburger: How to proceed on unlocking certain opportunities in the dynamic fields of ancillaries or bundles. And of course, also it helps that we continue on pilots with some close partners, try to find out where is the sweet spot of what is the perfect or the most optimal offer at what perfect or optimal time in the whole process flow.

Srikanth Ranganathan: Okay. Cat, do you want to add anything to it?

Cat Silva: Can I.

Srikanth Ranganathan: Yeah sure, please.

Cat Silva: It's very interesting because even though we are in different phases of how we are going to enable optimization, here we are talking one side of getting more and acquire more customers on your website, you are looking more at “How can I give the next steps on the Dynamicity of the content that I give to the customer”. And at PROS, we of course offer optimization is in our DNA obviously it's where everything starts, but it's very interesting because in all of these points to enable the offer optimization, when you offer something to the customer, there is one important point that is related to the data. And what you can consume as data. And we start, Pavlos just mentioned it started with offer marketing.

Cat Silva: This is one first big step for you to have, to know how to optimize your offer and to be able to actually optimize it, because you can learn the behavior of a customer. And then you can go from there to where Janine is saying about bringing more optimization to the price, bringing more optimization to the content, and creating dynamic bundles with it.

Srikanth Ranganathan: Okay. Actually, Cat the next question actually, I wanted to ask you, if you listen to airBaltic talk to some of our customers, and they're going to be speaking later today. From airBaltic's perspective, they have rolled out the Dynamic Ancillary Pricing, and a significant number of airlines are looking at it in terms of as the next logical step towards dynamic pricing.

Srikanth Ranganathan: What do you see in the marketplace with some of the customers that you have spoken to? You've spoken to customers as largest Lufthansa Group to yeah. The size of Cyprus Airways and everything in between. Do you see different priorities when it comes to different airlines? Are they, or a different region? Are they focusing on different ways of implementing? From an IT perspective, do they have a different mindset in doing this?

Cat Silva: I wouldn't say, from IT perspective they have it. I would say more on the business side. I think there is one point in common, and I think all airlines we talk about by dynamic ancillary prices, their main focus is seats. It looks like a, there is a treasure over there.

[laughter]

Srikanth Ranganathan: Okay.

Cat Silva: And everyone is trying to take a little bit of it. So, there is a lot of common ground on the way they implement. I think that smaller airlines, smaller to medium, are looking at “How can I do this without big impacts in my landscape?” Because they don't have the manpower, of course, to be able to make big changes on their IT landscape. I think the airlines that have bigger power on that area are looking at a bigger integration. So, they look at it a little bit further from the smaller ones. But in general, the ultimate goal is, I want to make more money.

[laughter]

Srikanth Ranganathan: Exactly. Anything to add?

Janine Hoerburger: I agree, but I think it also depends on your setup. I think everybody knows that Lufthansa group is not in complex, we are really big. We consist of eight airlines, eight hub airlines, and we are growing. And that doesn't make it much easier when it comes to defining new ways of adding dynamic ancillaries, for instance. And also, the fact that the legacy dependencies, which I mentioned at the very beginning, they're not gone yet. So, any new type of ancillaries, which we would like to sell, obviously, and which we would like to optimize the price about, comes with a stamping in a PNR, SSR and EMD or whatever.

Janine Hoerburger: So as long as these legacy dependencies aren't gone, we cannot completely be free about what we would like to sell or not. And also, to be very honest, the airline industry hasn't been very good in being a retailer of ancillaries. And even today when we talk about selling ancillaries or dynamic ancillaries, we are only talking about bags and seats. There's a huge opportunity in this business, and not only for us, but also for our partners, which will be able to add, and that creates appetite on their side again. And there we are again with adoption. Yeah.

Chrysanni Michael: I agree also, but, [laughter] Indeed, the main focus in the industry was on the, how to optimize prices on the fares. However, seeing that with the low-cost companies more revenue was generated through ancillaries, I believe the main focus in the future should be how to optimize the ancillaries at the right time to the correct passenger at the moment, he needs it. However, until now, I believe that the tools we have to monitor or to see the data about it is a little bit limited. And even how to monitor it or to read the behavior of the passenger is something that I hope that will come in the future more detailed. Because even optimization, RRM systems and everything, mainly their focus on the how to sell the ticket, and then everything just comes as add-on.

Srikanth Ranganathan: Right. Okay.

Pavlos Sarkas: Yeah. So, I also, like everyone. [laughter] But, I'm going to take the point. Catherine said that it's a small gold there that we haven't been utilizing ancillaries from our side. Being, we can't compete with a large plays at the moment. But we need to focus more ancillaries. We haven't been focusing at all on that. And on other stuff, not only bags and seats, but we're looking to offer other stuff. To make the customer's journey even better. So we're looking, we're really going to focus more on ancillaries, so that's why we are interested in the...

Cat Silva: Dynamic pricing.

Srikanth Ranganathan: Dynamic pricing. Yeah. Okay. Can anyone guess the two most prominent letters you guys heard today? There you go. [laughter] There you go, Ruben. So, the role of AI, and best practices in the industry today, you heard from, Turkish to begin with. Turkish airline, CIO was on the on the panel with our CEO, Hewlett Packard talked about it, Surein talked about it earlier today. Tell us, and the audience in terms of, what you see as adoption challenges for dynamic pricing and ancillary as these things get older. Because AI, actually going to be one of the main focus on this, right? In terms of the...

Chrysanni Michael: On the industry. And I see that everyone is building based on the AI. I believe it's going to turn to be a more accelerated tool to analyze data and implement it as a solution later. So, it will act on a faster way on how to react on the behavior of the passenger. Something that a human being cannot do, however, it's a bit, it's still, it's something that nobody understands fully how this will turn out to be. So, we need to evaluate it and really use it only on our benefits and not towards something that might come later just to have the AI doing it because it still needs the logic of the human behavior.

Srikanth Ranganathan: Right?

Chrysanni Michael: Okay. So, in my airline, no, I'm kidding, [laughter] I feel like AI is bringing something, is enabling airlines to be faster and be more automated and be able to answer to a more demanding and demanding world of tomorrow. It is absolutely essential to bring dynamicity to the offers that there is behind the scenes in AI component because it will be humanly impossible for an analyst in our days to be able to be reactive at the pace that the market is demanding. And even with all the potential data that you can analyze at the time, you have to make a lot of assumptions. And you're not machines, we are humans. So, we need a machine that can actually go through all of this data in a speed that allows us to bring out some accuracy, accurate results. So absolutely a must. And I don't think you heard enough these two letters. So.

[laughter]

Chrysanni Michael: AI is absolutely a must if we want to evolve in this area, in the airline world. Absolutely.

Srikanth Ranganathan: Yeah. For sure. Right go ahead.

Janine Hoerburger: You actually ask for challenges regarding adoption. I don't think it's a challenge for adoption. I think it's more a challenge for the landscape, if at all. And because that is something which we have seen already in little pieces, but it will come much more about, so all of a sudden, your entire landscape is bombarded, or IT landscape is bombarded with so many volumes of transactions, huge bandwidth, huge computation power is required. And I think that's a challenging area. Other than that, I don't see challenges for the adoption. I see chances to be very honest.

Srikanth Ranganathan: Very true. I agree. Last but not least, switching gears. The enablers, right? It's no Mickey Mouse matter when it comes to, there you go. Okay. There's my Mickey Mouse here. There you go. Okay. Yeah. So, this is no Mickey Mouse matters so from a technological standpoint, right? Everybody, cool.

[laughter]

Chrysanni Michael: Yours is the best?

[laughter]

Srikanth Ranganathan: So, everybody's talking about open modular approach, right? So, when you're talking about an open modular approach, think of, the standardization that we had to go through today when it came to inventory distribution, when we came to standardizing, how the EDIFACT message is getting transmitted, right? What do you see as the challenges and the enablers actually that the industry and the airline should be pushing the technology providers in terms of saying, when we want to go for this modular approach, we are going for it for the best of breed. And for it to happen that these are some of the technology that we need. These are the standardization that we need. Where do you see the airlines' role in it in terms of making sure that your interests are kept up, and placed above the rest?

Janine Hoerburger: Do you mind if I start? I got inspired by the years. [laughter] I will let you guys say how you feel about it. I'm going to say not the enablers or challenges, but a message that I've been seeing a lot in... Along the years and also, I came from an airline and I had exactly the same, is, we cannot be afraid, even though it looks scary to take the decision of creating choice on how the way we build our IT ecosystem. So, modularity can look scary, can look, oh my God, I'm just adding complexity. It can look all of that. And there is reasons for all of that to be there. But there is one thing that compensates that risk or that fear or overcome that fear, which is the possibility to choose what you do with your business, when you want to do it. And the day that something new comes in and you want to use it, you can, because you took that road. So, it's scary today. It's not going to be scary tomorrow. Just keep that in mind. Sorry, I just want really wanted to say that.

[laughter]

Cat Silva: There are so many aspects to that, right? And number one is, maybe really technology doesn't come without people, without processes and culture. I think that's very important. And number two, it also showcases that in the industry, in the consortiums in modern airline retailing, all the architecture target picture, they include modularity. All of those modules include, in one way or the other, AI. So, I think it goes hand in hand. If technology is around the corner, they're not scary anymore, but also people in process people and process, are being adopted as well.

Srikanth Ranganathan: Oh, okay.

Pavlos Sarkas: Us being a small island in the Mediterranean and I'm the IT manager, so I have to say that when I introduced to them something new, they jump to the roofs. Okay. So it's a big challenge for me, but...

Srikanth Ranganathan: There's this guy here sitting who's probably can agree with you there. [chuckle]

Pavlos Sarkas: So yeah, that's what, that's the message as Catherine said, that, it's scary today, but if we adopt it and move forward, it's the benefit to all of us and this is the way forward. The AI, and we also got a new AI RM system in, and everybody was shocked about, but we have, we have to adopt to the changes. Otherwise, there's no easy way forward.

Srikanth Ranganathan: Okay. And do you see, as a follow up, do you see any challenges or enablers that can come from within, from the organization or resource standpoint? From an IT perspective?

Pavlos Sarkas: Okay. Going through basics to the three-year implementation. Okay. With PROS, it was smooth, very smooth. One of the smoothest. And not just because we're here, but I mean what you say is what you do. The time and is so smooth that's why we're here for more. Challenges. It might be pricing strategies to go together with the revenue goals that might have, training staff, all these might be challenges, but as I said, it's our job to make them adopt this new change.

Srikanth Ranganathan: Good. Chrysanni, you want to add something to that?

Chrysanni Michael: I was going to say back to the change. I see a lot of people that are afraid to take the next step and to learn something new. So, they are mainly focusing on what is changing and not what is going to be beneficial for them, because when you are moving to something more advanced to what you were doing, especially for us that we had a lot of manual processes and now we try to move to optimization. They might feel that they're losing a little bit of the control. However, you can still use it with the tools you have. The optimization tools to gain more time, to be more efficient. So, it's needed to actually move on and involve and develop yourself on something else, because the industry is evolving so fast that you cannot stay behind.

Srikanth Ranganathan: Good. Thank you.