OP-ED: Yield Systems Offer A Sporting Chance
<B> OP-ED: Yield Systems Offer A Sporting Chance</B>
By Robert Cross
<i>Robert Cross is chairman of DFI/Aeronomics and author of the New York Times' business bestseller, "Revenue Management: Hard-Core Tactics for Market Domination" (Broadway Books, 1997).</i>
Airline ticket pricing is the subject of increasing criticism.
Congressional hearings have been called to investigate the pricing practices of airlines, and articles deriding the complexity and unfairness of airline ticket prices are becoming more frequent in the press.
This criticism is often directed at the wide disparity between the lowest and highest fares as well as the rules and restrictions around the use of certain discount fares. Much of the criticism focuses on the unavailability of discounts in situations where demand exceeds aircraft capacity on peak travel days at hub airports.
Airlines currently use revenue management systems to forecast demand for their seats and set market-based prices to balance supply with demand. These systems review and revise discount allocations daily to raise the effective price on flights that are predicted to be full and make discounts plentiful on flights that are anticipated to have empty seats. Since the demand for any particular future departure may fluctuate over time, prices will too. This is often the source of customer frustration, as two passengers on the same flight may pay radically different fares. And while a seat may be available for a last-minute customer, you can forget about getting a discount during a peak period.
Given the broad criticism of this process, I thought that the airlines might be able to learn a thing or two from other organizations that face similar problems of allocating capacity when demand outstrips supply.
A useful example might be the National Collegiate Athletic Association's Men's Final Four Basketball Tournament recently held in San Antonio. From all indications, the event was a success, and the ticket allocation process has not drawn fire from Congress or the press. The same process has been used for the past few years and is in place for the Men's Final Four to be held next year in St. Petersburg. Could this be a model for the airlines to avoid criticism about the way they handle ticket prices and seat availability during peak travel times?
The 1999 NCAA Men's Final Four will be held on March 27 and 29 at Tropicana Field in St. Petersburg, Fla. If you want to buy a ticket to this event, you must first request an application form from the NCAA. The applications are only available between April 1, 1998, and May 1, 1998, 11 months before the event. The application form will be sent to you within ten days. Official application forms must be used; photocopies will not be accepted. You may request a maximum of only two tickets, and you must submit a personal check for the tickets (priced between $80 and $100) at the time you submit your application.
The application must be received (not postmarked) by midnight May 15, 1998, ten months prior to the event, in order to be eligible for a computerized random drawing to be held in July, 1998. Applicants will be notified in August, and unsuccessful applicants will receive a full refund less a $2 handling fee.
I have just submitted my request for a ticket application from the NCAA, and I am optimistic that they can get the official application to me so that I can return it to them within the prescribed time. I also am optimistic that I will be among the chosen, since I have never won anything in my life and the probabilities of my winning something sometime are accumulating greatly in my favor.
Armed with this optimistic outlook, I decided that I should book my flight to Tampa/St. Petersburg since airline seats also will be in high demand during this period. Because of my advanced planning, I had the option between a $125 roundtrip, nonrefundable ticket (changeable with a $75 fee) and a $786 refundable fare. I feel good about my chances, so I am leaning toward the lower fare.
From information provided by the NCAA on its Website, I discover that the odds are against me by about 20 to 1. This is because so many of the tickets already are allocated to representatives of the NCAA, the local host organization, the participating schools, other Division I institutions and members of the National Association of Basketball Coaches. I could take my chances from a ticket scalper at the venue, but I don't want to buy a non-refundable airline ticket with that as my only backup plan.
An Internet search discloses a number of ticket brokers, such as Great Seats and Western States Ticket Services, advertising Final Four seats. They are willing to obtain a ticket for me as tickets become available from ticket winners, the host committee, athletic directors, NCAA members and coaches. These ticket brokers can't currently guarantee a ticket, but they say that tickets inevitably become available starting in January. Not only is this later than I want for planning purposes, but those tickets usually go for prices ranging from $350 to $4,000 each!
I want to go ahead and book my airline seat at the lower fare, so I called the NCAA's assistance line to see if I can get more information about my prospects of actually attending the event. An automated voice system told me to leave a message and a daytime phone number so that a representative could get back to me within two business days.
What can the airlines learn from the NCAA about selling tickets in high demand periods? Absolutely nothing. I have little confidence in obtaining a Final Four ticket, even at outrageous after-market prices. I will miss my chance to lock-in a cheap airline seat in advance. However, I am sure that an airline seat will be available later since the airlines' Revenue Management systems will save an appropriate number of full-fare seats for last-minute travelers like me.
I'll see what can be learned from the NFL in selling Super Bowl tickets.