airline revenue management

With the increasing interest in decision support systems and the continuous advance of computer science, revenue management is a discipline which has received a great deal of interest in recent years. Although revenue management has seen many new applications throughout the years, the main focus of research continues to be the airline industry. Ever since Littlewood (1972) first proposed a solution method for the airline revenue management problem, a variety of solution methods have been introduced. In this paper we will give an overview of the solution methods presented throughout the literature.revenue management;seat inventory control;OR techniques;mathematical programming

Discrete Choice Models for Revenue Management

In the transportation field, the shift of airline and railway industries toward web-based distribution channels has provided passengers with better access to fare information. This has resulted in passengers becoming more strategic to price. Therefore, a better understanding of passenger choice behavior is required in order to support fare strategies. Methods based on discrete choice (DC) analysis have recently been introduced in revenue management (RM). However, applications of DC models in railway ticket pricing are limited and heterogeneity in choice behavior across different categories of travelers has mostly been ignored. Differences in individual taste are crucial for the RM sector. Additionally, strategic passenger behavior is significant, especially in markets with flexible refund and exchange policy, where ticket cancellation and exchange behavior has been recognized as having major impacts on revenues. This dissertation examines innovative approaches in discrete choice modeling to support RM systems for intercity passenger railway. The analysis, based on ticket reservation data, contributes to the existing literature in three main aspects. Firstly, this dissertation develops choice models of ticket purchase timing which account for heterogeneity across different categories of passengers. The methodology based on latent class (LC) and mixed logit (ML) model framework offers an alternative approach to demand segmentation without using trip purposes which are not available in the data set used for the analysis. Secondly, this dissertation develops RM optimization models which use parameters estimated from the choice models and demand functions as key inputs to represent passenger response to RM policy. The approach distinguishes between leisure and business travelers, depending on departure time and day of week. The formulated optimization problem maximizes ticket revenue by simultaneously solving for ticket pricing and seat allocation. Strategies are subjected to capacity constraints determined on the basis of the railway network characteristics. Finally, this dissertation develops ticket cancellation and exchange model using dynamic discrete choice model (DDCM) framework. The estimated model predicts the timing of ticket cancellations and exchanges in response to trip schedule uncertainty, fare, and refund/exchange policy of the railway service. The model is able to predict new departure times of the exchanged tickets and covers the full range of departure time alternatives offered by the railway company

Models and Techniques for Hotel Revenue Management Using a Roling Horizon

AbstractThis paper studies decision rules for accepting reservations for stays in a hotel based on deterministic and stochastic mathematical programming techniques. Booking control strategies are constructed that include ideas for nesting, booking limits and bid prices. We allow for multiple day stays. Instead of optimizing a decision period consisting of a fixed set of target booking days, we simultaneously optimize the complete range of target booking dates that are open for booking at the moment of optimization. This yields a rolling horizon of overlapping decision periods, which will conveniently capture the effects of overlapping stays.mathematical programming;Revenue Management;yield management

airline revenue management

With the increasing interest in decision support systems and the continuous advance of computer science, revenue management is a discipline which has received a great deal of interest in recent years. Although revenue management has seen many new applications throughout the years, the main focus of research continues to be the airline industry. Ever since Littlewood (1972) first proposed a solution method for the airline revenue management problem, a variety of solution methods have been introduced. In this paper we will give an overview of the solution methods presented throughout the literature

Dynamic pricing under customer choice behavior for revenue management in passenger railway networks

Revenue management (RM) for passenger railway is a small but active research field with an increasing attention during the past years. However, a detailed look into existing research shows that most of the current models in theory rely on traditional RM techniques and that advanced models are rare. This thesis aims to close the gap by proposing a state-of-the-art passenger railway pricing model that covers the most important properties from practice, with a special focus on the German railway network and long-distance rail company Deutsche Bahn Fernverkehr (DB). The new model has multiple advantages over DB’s current RM system. Particularly, it uses a choice-based demand function rather than a traditional independent demand model, is formulated as a network model instead of the current leg-based approach and finally optimizes prices on a continuous level instead of controlling booking classes. Since each itinerary in the network is considered by multiple heterogeneous customer segments (e.g., differentiated by travel purpose, desired departure time) a discrete mixed multinomial logit model (MMNL) is applied to represent demand. Compared to alternative choice models such as the multinomial logit model (MNL) or the nested logit model (NL), the MMNL is significantly less considered in pricing research. Furthermore, since the resulting deterministic multi-product multi-resource dynamic pricing model under the MMNL turns out to be non- linear non-convex, an open question is still how to obtain a globally optimal solution. To narrow this gap, this thesis provides multiple approaches that make it able to derive a solution close to the global optimum. For medium-sized networks, a mixed-integer programming approach is proposed that determines an upper bound close to the global optimum of the original model (gap < 1.5%). For large-scale networks, a heuristic approach is presented that significantly decreases the solution time (by factor up to 56) and derives a good solution for an application in practice. Based on these findings, the model and heuristic are extended to fit further price constraints from railway practice and are tested in an extensive simulation study. The results show that the new pricing approach outperforms both benchmark RM policies (i.e., DB’s existing model and EMSR-b) with a revenue improvement of approx. +13-15% over DB’s existing approach under a realistic demand scenario. Finally, to prepare data for large-scale railway networks, an algorithm is presented that automatically derives a large proportion of necessary data to solve choice-based network RM models. This includes, e.g., the set of all meaningful itineraries (incl. transfers) and resources in a network, the corresponding resource consumption and product attribute values such as travel time or number of transfers. All taken together, the goal of this thesis is to give a broad picture about choice-based dynamic pricing for passenger railway networks

Business to business online revenue management.

With the emergence of the Internet, electronic commerce (e-commerce), revenue management and especially applications that combine both are becoming increasingly an area of innovation for service industries. E-commerce has introduced efficiencies across the service chain and it has allowed improvements to take place within and across organizations. Revenue management when combined with ecommerce and done online not only improves resource management but it can be used as a strategic tool to gain competitive advantage. This chapter examines the current approaches and future trends in these very exciting and promising areas

The choice of airport, airline, and departure date and time: Estimating the demand for flights

This chapter estimates the demand for flights in an international air travel market using a unique dataset with detailed information not only on flight choices but also on contemporaneous prices and characteristics of all the alternative non-booked flights. The estimation strategy employs a simple discrete choice random utility model that we use to analyze how choices and its response to prices depend on the departing airport, the identity of the carrier, and the departure date and time. The results show that a 10% increase in prices in a 100-seat aircraft throughout a 100-period selling season decreases quantity demanded by 7.7 seats. We also find that the quantity demanded is more responsive to prices for Delta and American, during morning and evening flights and that the response to prices changes significantly over different departure dates