Ryan Estes, Vice President of Technology and Academy at Datalex is interviewed by Graham Newton, editor of Airlines IATA magazine about Datalex's new product Datalex Pricing AI which is set to transform the industry.
Why does Datalex Pricing AI exist and what problem does it solve?
Traditionally, airlines have been constrained by static pricing. An airline constructs its fares using different price points based on reservation booking designators (RBDs) and then publishes them for distribution. Relying on RBDs limits the number of price points the airline may use. Moreover, this process is not real-time and cannot account for fluctuating market demands and travel environments.
Most airlines and their revenue management departments use their long-standing tools to establish their pricing strategies. But to effectively segment their customers and capture more revenue opportunities in real time, airlines need to understand complex and fluctuating market conditions as they happen. That involves sophisticated data analytics and machine learning capabilities.
Ultimately it moves airlines on from outmoded, restrictive pricing processes to an intelligent, real-time process that drives increased demand and revenues for the airline.
What are the advantages of AI-based dynamic pricing?
Data-driven/AI-powered price optimization considers many more factors than traditional revenue management, leading to a positive impact on long-term revenue, brand awareness, and customer loyalty thanks to more optimized pricing.
There is a faster response to demand fluctuations, for example, which means immediate revenue uplift. Traditional revenue management has to trade-off between speed of response and price accuracy, but AI and automated, smarter decision-making helps airlines to achieve both optimal price accuracy and speed to market.
It all leads to competitive advantage and an opportunity for increased revenue and to realize significant change in airlines’ underlying technology.
Why is scale and real time so important in this product?
Better and smarter reactivity brings immediate returns. Since we can’t collect data from the future, models must rely on historical data to predict the future and that is a lot of data! The market is very dynamic, things are changing all the time, so those forecasts are less reliable the further you get into the future.
Forecasts are like code—outdated the moment they are written. Hence, the importance of real time.
Airlines need to move beyond fixed fare classes to a customer-centric world in which pricing never sleeps and dynamic price tags are continuously generated and aligned with market conditions and customer needs.
What does your solution do differently?
To begin with, it is easy and fast to implement. It is plug and play AI-powered pricing that seamlessly integrates with any shopping engine.
We like to describe ourselves as disruptors without causing disruption for the airline. We don’t restructure revenue management, we enhance it, make it better, and more profitable. We scale airline intelligence in real time. By automating complexity and optimizing pricing, this product will do what an airline does today—only supercharged.
So there is no impact to existing revenue management systems and/or processes.
The AI does not even need to be deployed across the entire network. Airlines can choose as many or as few routes as they like to use the product on. It’s completely configurable and flexible.
Our market-leading reasoning behind the AI is also an important differentiator. We use multiple machine learning models to achieve human-level decision making, and then that is cross-checked and ‘reasoned’ with to apply the same level of common sense that a human would. Essentially, Datalex Pricing AI thinks like you, but not for you. It is the next generation of AI-powered airline pricing.
What do you need from potential airline clients?
Not much! We only need access to the airline’s data. There is no big bang. The adoption of the product across the network is a journey. Datalex ingests the airline’s data and we use it to train the AI models.
Does this solution replace the human?
No. AI-driven pricing will out-perform traditional revenue management and pricing processes, but it doesn’t replace the human. AI is more about driving efficiencies within revenue management by achieving greater output in less time and at a much lower cost. And because it does not necessarily need to be deployed across the entire network it allows revenue management professionals to put all their time and energy into pricing the markets that matter the most while the AI prices the rest. Thus, also driving greater human output.
This product doesn’t claim to replace your revenue management team. Rather, it will work as a collaborative team member to scale decision-making, make it smarter and in real time.
Airlines trust Datalex Pricing AI thanks to advanced drift detection techniques and parameter safety nets that give airlines peace of mind that they are very much in control.
How will your solution develop?
Datalex demonstrated a significant revenue uplift for an airline when it completed a production trial in 2021. Our Pricing AI product will be officially launched and in production by summer 2022. We have a very ambitious roadmap to extend to more price influencing factors, such as competitive pricing and consumer willingness to pay.
We surveyed airline executives at the end of 2021 and the research found a number of factors that are important to them when determining price. These inputs include (but aren’t limited to) government regulations, new market penetration pricing, and customer reaction and sentiment. Our product will develop in line with market needs, taking into account the multitude of factors that airlines deem most important to determine their price.
Airlines can choose as many or as few markets across their route network as they wish to use Pricing AI, which replicates and scales in-house intelligence. Keep your best people focused on your best performing markets and Pricing AI will take care of the rest.
Register here to join our live discussion with IATA ‘From incremental to exponential: The power that AI-driven airline pricing has to transform and supercharge revenue management strategies' on 6th July 14:00 BST.
Find out more and download the Datalex Pricing AI datasheet here.