Revenue Integrity: definition and why it matters for Revenue Management

What is revenue integrity and why does it matter?

With the growth of tourism and travel becoming accessible to all, supply has multiplied in air transport and tourism, giving rise to a multitude of products, distribution channels, services and intermediaries… Later, the emergence of revenue management in the 1980s led to complex and varied fare structures at hotels and airlines, governed by conditions of use, duration and payment… on top of which come promotions, loyalty programmes and additional services… The players themselves struggle to find their way through it all, and this complexity in the distribution chain sometimes opens the door to malfunctions that can occur at any point in the booking process.

Revenue leakage and lost revenue

Individuals and tour operators readily exploit these loopholes, which can represent significant revenue leakage for companies. For airlines, the cost is estimated at around 4 to 6% of revenue.

The most common types of fraud and error include:

• Fictitious groups: travel agencies book a number of seats to obtain a group fare, then sell those seats one by one to individuals
• Fictitious bookings: bookings made internally during tests and/or training, unticketed bookings, payment fraud…
• Inconsistent bookings made through intermediaries or directly: lack of product knowledge, insufficient training, failure to follow fare rules…
• Ticket purchase fraud: buying several return tickets to get around fare rules requiring a minimum or maximum length of stay

This is where “revenue integrity” comes in. As an extension of revenue management, revenue integrity is defined as the set of processes that ensure legal and contractual rules are properly applied.

Revenue integrity also helps recover the revenue lost through no-shows. According to the AEA (Association of European Airlines), their net cost amounts to 1.6% of annual revenue for European airlines.

By identifying and cancelling fictitious bookings, the no-show rate falls dramatically, improving the company’s revenue.

Technology in the service of revenue integrity

In air transport, Amadeus and Sabre offer real-time technical solutions that detect attempted fraud. This software monitors potential revenue leakage at every stage of the ticket booking process.

It sets rules to identify and then cancel fictitious or unticketed bookings after a given time limit – and to define that time limit – as well as to limit abusive name changes in PNRs caused by fictitious groups. It also makes it possible to check fares and means of payment and to improve communication between the reservation system and the yield management system.

The seats released in this way are instantly returned to inventory so they are available for sale again.

Particular attention is paid to flights with high load factors, as they are more profitable and all the more sensitive to the revenue losses caused by no-shows.

The benefits

Thanks to revenue integrity, airlines achieve higher revenue through better load factors and lower GDS booking fees. They also save all the indirect costs caused by no-show passengers: wasted meals, overstaffing…

According to Sabre, airlines that have implemented a revenue integrity solution have seen their revenue improve by 1%.

Lufthansa claims to have generated an additional €20 million in revenue thanks to revenue integrity, compared with €60 million for KLM, according to Amadeus.

Océane BOCA, consultant at Aerogestion