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Struggling To Understand Demand

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Struggling To Understand Demand

Messagede pdmarsh » Mar Nov 27, 2018 16:00

I am having trouble understanding the concept of demand vs. remaining demand. In the "Typical Week" view below, the chart indicates that I am meeting just about 100% of the demand on a daily basis. However, the "Price Management" view indicates a "Remaining Demand" of roughly 40%. I do not understand the difference. Shouldn't this data match, i.e. wouldn't remaining demand be close to zero in the price management view?

In another case, I increased prices until remaining demand was close to zero. However, turnover went down. Again, I don't understand how this can be. If my plane was full, which should be the case if there is still remaining demand, then it should still be full as I raise prices while still having a few pax in remaining demand, but much closer to zero. Shouldn't my turnover increase?

Any help will be appreciated.

Thank you,
Paul

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Struggling To Understand Demand

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Re: Struggling To Understand Demand

Messagede Inventivenes Airways » Mer Nov 28, 2018 07:22

The graph is set to 'All Passenger Types', which includes Cargo. You currently have negative demand for Cargo (which is normal), which is causing the confusing graph. If you tap the drop-down icon and un-select Cargo it should make more sense.
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Re: Struggling To Understand Demand

Messagede pdmarsh » Mer Nov 28, 2018 14:19

Inventivenes Airways a écrit:The graph is set to 'All Passenger Types', which includes Cargo. You currently have negative demand for Cargo (which is normal), which is causing the confusing graph. If you tap the drop-down icon and un-select Cargo it should make more sense.


Thank you! That helps a lot. Any thoughts on the second part regarding turnover? In that case, I was looking at passenger demand and remaining passenger demand in my simulations.

Paul
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Re: Struggling To Understand Demand

Messagede KillayAir » Lun Déc 03, 2018 06:57

pdmarsh a écrit:
Inventivenes Airways a écrit:The graph is set to 'All Passenger Types', which includes Cargo. You currently have negative demand for Cargo (which is normal), which is causing the confusing graph. If you tap the drop-down icon and un-select Cargo it should make more sense.


Thank you! That helps a lot. Any thoughts on the second part regarding turnover? In that case, I was looking at passenger demand and remaining passenger demand in my simulations.

Paul


The second part happens because the simulation tells you the maximum turnover available for the fares that you have put into the simulation. It doesn't tell you what turnover you will actually receive, except where the simulation is done on fares that reduce your remaining demand to zero.

When you do a simulation, it will tell you the maximum turnover available at the level of fares shown. The maximum turnover is obtainable when you set your fares to the ideal fare given to you by doing an audit. However, to get that turnover you need to provide seats to match the ideal demand exactly. If you provide fewer seats you collect less actual turnover than that stated by the simulation.

When you increase your fares to reduce your remaining demand to zero, the maximum turnover stated by the simulation reduces. However, if you set your fares at this higher level, you get to keep all the stated turnover because you have seats to match the demand. This turnover is lower than the maximum available on the route, but the most you will earn for the number of seats available.

Simon
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Re: Struggling To Understand Demand

Messagede pdmarsh » Ven Déc 07, 2018 19:46

KillayAir a écrit:
The second part happens because the simulation tells you the maximum turnover available for the fares that you have put into the simulation. It doesn't tell you what turnover you will actually receive, except where the simulation is done on fares that reduce your remaining demand to zero.

When you do a simulation, it will tell you the maximum turnover available at the level of fares shown. The maximum turnover is obtainable when you set your fares to the ideal fare given to you by doing an audit. However, to get that turnover you need to provide seats to match the ideal demand exactly. If you provide fewer seats you collect less actual turnover than that stated by the simulation.

When you increase your fares to reduce your remaining demand to zero, the maximum turnover stated by the simulation reduces. However, if you set your fares at this higher level, you get to keep all the stated turnover because you have seats to match the demand. This turnover is lower than the maximum available on the route, but the most you will earn for the number of seats available.

Simon


Thank you for the explanation. I appreciate it very much.

Paul
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Re: Struggling To Understand Demand

Messagede GiovanniM » Mer Jan 02, 2019 11:14

Hi,

I have a related question: I have negative remaining demand for certain routes. I would therefore think I need to reduce the prices. However, when I perform an audit, the result is further increased prices - which then (obviously) results in higher negative remaining demand. Can anyone explain to me what I am missing here?

Many thanks !
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Re: Struggling To Understand Demand

Messagede KillayAir » Lun Jan 07, 2019 14:16

GiovanniM a écrit:Hi,

I have a related question: I have negative remaining demand for certain routes. I would therefore think I need to reduce the prices. However, when I perform an audit, the result is further increased prices - which then (obviously) results in higher negative remaining demand. Can anyone explain to me what I am missing here?

Many thanks !


As far as I can see, you should always charge at least the ideal fare recommended by audit, even if you have negative remaining demand. Use simulation to test this on a route with negative demand. Multiply the fare charged by the number of passengers carried at that fare. Compare a lower fare with the recommended fare and you will find that the recommended fare generates more revenue even though less passengers choose to travel.

So I think that the game is behaving as expected. Reducing fares will fill your plane but won't necessarily increase your revenue or profit on that flight.

Best wishes,

Simon
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