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 language | English (US) |
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Pages (from-to) | 104-120 |
Number of pages | 17 |
Journal | Journal of Travel Research |
Volume | 58 |
Issue number | 1 |
DOIs | |
State | Published - 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