Will You Buy It Now?: Predicting Passengers that Purchase Premium Promotions Using the PAX Model

Abstract

Upselling is often a critical factor in revenue generation for businesses in the tourism and travel industry. Utilizing passenger data from a major international airline company, we develop the PAX (Passenger, Airline, eXternal) model to predict passengers that are most likely to accept an upgrade offer from economy to premium. Formulating the problem as an extremely unbalanced, cost-sensitive, supervised binary classification, we predict if a customer will take an upgrade offer. We use a feature vector created from the historical data of 3 million passenger records from 2017 to 2019, in which passengers received approximately 635,000 upgrade offers worth more than $422,000,000 U.S. dollars. The model has an F1-score of 0.75, outperforming the airline's current rule-based approach. Findings have several practical applications, including identifying promising customers for upselling and minimizing the number of indiscriminate emails sent to customers. Accurately identifying the few customers who will react positively to upgrade offers is of paramount importance given the airline 'industry's razor-thin margins. Research results have significant real-world impacts because there is the potential to improve targeted upselling to customers in the airline and related industries.

Artificial intelligence (AI) and robotics in travel, hospitality and leisure

“…In travel and tourism, solution-based or platformbased tools such as recommender systems and chatbots have been developed to provide personalized, location-based, context-aware information services and customer support services such as hotel recommendations, destination selection, travel planning alternative itinerary/route options, and customer service and complaint management (Ricci, 2002;Fesenmaier et al, 2006). These tools are becoming increasingly pervasive in commercial applications due to the diffusion of the smartphone and of social media (particularly in the travel sector) (Al Emadi et al, 2021). Equipped with AI-based technology including voice-activated tools such as Alexa and Google Home, intelligent systems have been applied widely in everyday and travel contexts to assist our everyday life and leisure activities.…”