Empirical Evidence of Revenue Management in the Cruise Line Industry

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

Research output: Contribution to journalArticlepeer-review

11 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

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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