Empirical Evidence of Revenue Management in the Cruise Line Industry

Nur Ayvaz-Cavdaroglu, Dinesh K. Gauri, Scott Webster

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

Revenue management (RM) has received considerable attention from both academic and business professionals. It encompasses several techniques regarding capacity allocation, pricing, and resource management of fixed, time-sensitive capacity. RM can be roughly divided into two categories defined by the control mechanism that increases revenue: capacity allocation or price optimization. Our work falls in the latter category. In our model, we allow for partial substitutability among products (e.g., a customer making a purchase decision may consider multiple alternatives—different departure dates, different destinations, different cabin types). We also include marketing expense in addition to prices as a lever for increasing revenue. These features are relevant to dynamic pricing in practice. The method is illustrated with booking data from a cruise company, yielding optimal advertising and prices for 300 products. The application of the model results in an increase in revenue in the range of 8%–20%.

Original languageEnglish (US)
Pages (from-to)104-120
Number of pages17
JournalJournal of Travel Research
Volume58
Issue number1
DOIs
StatePublished - Jan 1 2019

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Keywords

  • cruise industry
  • empirical application
  • multinomial choice model
  • revenue management

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Transportation
  • Tourism, Leisure and Hospitality Management

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