The Rise of Opaque Products as an Efficient Revenue Management Technique in the Travel Industry

This paper discusses and reviews in detail about opaque products which is also known as probabilistic goods, right from its inception and beginnings in early 2000’s. Opaque products are virtual goods and can be considered as a relatively new revenue management technique that has aided mainly the travel industry, specifically the airlines and hotels to increase their revenues and profits by intentionally withholding certain key information for some of the products to the customers. For Example, in airline industry the information may be product attributes like carrier, transfers, departure time etc. These products primarily trades consumption value for price savings with the buyers. Several models of opaque products which segment the market, thereby enhancing price discrimination and providing revenue enhancement, specifically in the airline industry have been described in this paper. A specific type of opaque product known as variable opaque product has also been described. Such variable opaque products allow the customer to pick and choose the attributes thereby varying the opaqueness. Thus, they have been found extremely advantageous and provide financial benefits to the airlines while providing welfare to the customers. The advantages of opaque selling models both to the customer as well as the airlines under certain types of environment has also been discussed along with its extensive applications in seat inventory control and inter-temporal pricing. Finally, the paper comes up with a few useful propositions that can be either tested empirically or modelled appropriately along with probable future work that should provide a vivid reader with the necessary spark that would aid him or her to contribute to further useful work in this area.