Metric Type Level
SAVINGS: Yes MASTER
SERVICE: No ADVANCED
SAFETY: No BASIC
SUSTAINABILITY: No
Description
When you have an airline deal that offers a point-of-sale discount, it is relatively easy to calculate the value of the contract discount savings.
Formula
Fare paid / (1-Discount %) – Fare paid = Contract Value
For example, a flight that was flown at $900 after the 10% discount generates $100 in contract value ($900 / (1-10%) - $900 = $100).
In the fondly remembered past, many airlines offered market-wide discounts (e.g. 15% off all fares all the time). Calculating the contract value was quick and easy. Today, unless you manage a truly market-moving amount of air volume (> $100M), the growing sophistication of reporting systems are driving discounts that are segmented depending upon fare basis codes and city pair routings. Calculating the contract value today means breaking down your airline flight data into fare basis buckets, applying the formula above where the discounts apply, accommodating any variances by city pair, and summing up the savings. I suggest requesting a savings summary from the carrier to match against the data provided by your TMC to validate the savings totals. Some variability is expected, but variances of more than 5% for the same time frames need further analyses.
Usage
This savings figure can be used as a snapshot measurement (e.g. how much did we save last quarter) and as a trend metric showing variations in savings performance over time (e.g. are travelers more compliant, is this year's deal better than last year's, etc.).
This type of metric is very easily understood by non-travel professionals.
Caveat
This metric measures contract value only. In the above example, there may have been an alternate flight, on another carrier perhaps, priced at $950. The discounted fare of $900 is still the cheapest, but the true “savings” in this instance could be considered $50 (for the closest alternative to the fare chosen). This level of granularity is difficult to measure without a lot of manual coding at the point-of-sale by the travel agents and/or going through an extensive fare audit from a third party provider. With explanation, most executives accept contract value as a valid savings metric.
SAVINGS: Yes MASTER
SERVICE: No ADVANCED
SAFETY: No BASIC
SUSTAINABILITY: No
Description
When you have an airline deal that offers a point-of-sale discount, it is relatively easy to calculate the value of the contract discount savings.
Formula
Fare paid / (1-Discount %) – Fare paid = Contract Value
For example, a flight that was flown at $900 after the 10% discount generates $100 in contract value ($900 / (1-10%) - $900 = $100).
In the fondly remembered past, many airlines offered market-wide discounts (e.g. 15% off all fares all the time). Calculating the contract value was quick and easy. Today, unless you manage a truly market-moving amount of air volume (> $100M), the growing sophistication of reporting systems are driving discounts that are segmented depending upon fare basis codes and city pair routings. Calculating the contract value today means breaking down your airline flight data into fare basis buckets, applying the formula above where the discounts apply, accommodating any variances by city pair, and summing up the savings. I suggest requesting a savings summary from the carrier to match against the data provided by your TMC to validate the savings totals. Some variability is expected, but variances of more than 5% for the same time frames need further analyses.
Usage
This savings figure can be used as a snapshot measurement (e.g. how much did we save last quarter) and as a trend metric showing variations in savings performance over time (e.g. are travelers more compliant, is this year's deal better than last year's, etc.).
This type of metric is very easily understood by non-travel professionals.
Caveat
This metric measures contract value only. In the above example, there may have been an alternate flight, on another carrier perhaps, priced at $950. The discounted fare of $900 is still the cheapest, but the true “savings” in this instance could be considered $50 (for the closest alternative to the fare chosen). This level of granularity is difficult to measure without a lot of manual coding at the point-of-sale by the travel agents and/or going through an extensive fare audit from a third party provider. With explanation, most executives accept contract value as a valid savings metric.
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