In 2002 Travelocity was losing revenue and market share as the online travel business changed around it.
Travelocity and Sabre developed the enterprise network model (ENM), combining discrete-choice customer modeling with simulation and large-scale optimization.
The ENM improved management of supplier agreements, customer marketing, and product pricing. It contributed over $54 million to Travelocity earnings, at a current rate of $43 million per year.
Model choice, then optimize everything
Discrete-choice modeling explained how travelers pick offers
Simulation handled uncertainty in demand and competition
Optimization aligned deals, marketing, and pricing with one model
Retailer behavior beat agency behavior in a changing market
When a marketplace middleman loses share, the fix is to know how customers choose: a demand model lets supplier deals, marketing, and pricing be optimized against one coherent view of the customer.
INFORMS cited Travelocity's Enterprise Network Model as yielding over $40 million in connection with its travel website when naming past finalists in 2007. The Interfaces paper reported the $54 million earnings contribution and the $43 million annual run rate.
FOLLOW THE EVIDENCE
The sources
- Travelocity Becomes a Travel Retailer EconPapers / Interfaces (INFORMS) · econpapers.repec.org
- 6 finalists compete for achievement in operations research EurekAlert (INFORMS release) · eurekalert.org ·