Application: Revenue Management

 Revenue Management: Management of inventory, distribution channels and prices to

maximize profit over the long run

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Application: Revenue Management
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 Revenue Management: Management of inventory, distribution channels and prices to

maximize profit over the long run

 Selling the right product to the right customer at the right time at the right price.

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Application: Revenue Management
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 Some related industries?

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Application: Revenue Management
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 Some related industries:

 Airline Industry

 Hotel Industry

 Ocean Cargo Industry

 Car Rental Industry

 Restaurant Industry

 Entertainment Industry

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Application: Revenue Management
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Revenue Management in Airline Industry:

 How many seats to make available at each of the listed fares depending on
 …

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Application: Revenue Management
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Revenue Management in Airline Industry:

 How many seats to make available at each of the listed fares depending on
 the OD pair, time of year,

 time of week,

 remaining seats available, and

 remaining time until departure.

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Application: Revenue Management
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Revenue Management in Airline Industry:

 How many seats to make available at each of the listed fares depending on
 the OD pair, time of year,

 time of week,

 remaining seats available, and

 remaining time until departure.

 What contracts and prices to provide to corporations

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Application: Revenue Management
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Revenue Management in Airline Industry:

 How many seats to make available at each of the listed fares depending on
 the OD pair, time of year,

 time of week,

 remaining seats available, and

 remaining time until departure.

 What contracts and prices to provide to corporations

 How many seats to make available to consolidators and travel agents, and at what prices.

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Application: Revenue Management
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Revenue Management in Airline Industry:

 How many seats to make available at each of the listed fares depending on
 the OD pair, time of year,

 time of week,

 remaining seats available, and

 remaining time until departure.

 What contracts and prices to provide to corporations

 How many seats to make available to consolidators and travel agents, and at what prices.

 How much capacity to make available to cargo shippers and freight

forwarders, and at what prices.

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Application: Revenue Management
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Revenue Management in Hotel Industry:

 How much to charge for a room depending on …

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Application: Revenue Management
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Revenue Management in Hotel Industry:

 How much to charge for a room depending on the location, type of room, time of year,
time of week, duration of stay.

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Application: Revenue Management
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Revenue Management in Ocean Cargo Industry:

 Which types of contracts to enter into with shippers

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Application: Revenue Management
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Revenue Management in Ocean Cargo Industry:

 Which types of contracts to enter into with shippers

 How much capacity to commit to each shipper

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Application: Revenue Management
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Revenue Management in Ocean Cargo Industry:

 Which types of contracts to enter into with shippers

 How much capacity to commit to each shipper

 Which contract prices to have for each shipper

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Application: Revenue Management
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Revenue Management in Ocean Cargo Industry:

 Which types of contracts to enter into with shippers

 How much capacity to commit to each shipper

 Which contract prices to have for each shipper

 How to vary prices as a function of direction of trade, commodity, and time of year

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Application: Revenue Management
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Revenue Management in Car Rental Industry:

 How much to charge for a rental car depending on the class of car, time of year, time of
week, duration of rent.

Revenue Management in Restaurant Industry:

 How much to charge for each dish

 How much to charge for lunch vs dinner

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Application: Revenue Management
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Revenue Management in Retail Industry:

Example: fashion apparel industry
 Products in fashion for a single season

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Application: Revenue Management
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Revenue Management in Retail Industry:

Example: fashion apparel industry
 Products in fashion for a single season

 Retailer wants to sell available inventory for maximum profit

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Application: Revenue Management
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Revenue Management in Retail Industry:

Example: fashion apparel industry
 Products in fashion for a single season

 Retailer wants to sell available inventory for maximum profit

 Prices higher at start of season

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Application: Revenue Management
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Revenue Management in Retail Industry:

Example: fashion apparel industry
 Products in fashion for a single season

 Retailer wants to sell available inventory for maximum profit

 Prices higher at start of season

 Retailer has to decide when to mark prices down, and by how much

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Application: Revenue Management
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Revenue Management in Entertainment Industry:

 Example: opera houses let their ticket prices depend on …

 The performance
 The reviews received so far
 Location of seat in opera house
 Day of the week of the performance
 Time of the day of the performance
 Time of performance in the season
 Remaining time until the performance
 Number of remaining seats available

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Application: Revenue Management
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Revenue Management in Entertainment Industry:

 Example: opera houses let their ticket prices depend on …

 The performance
 The reviews received so far
 Location of seat in opera house
 Day of the week of the performance
 Time of the day of the performance
 Time of performance in the season
 Remaining time until the performance
 Number of remaining seats available

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Revenue Management in Entertainment Industry:

Success Stories:
 American Airlines increased annual revenue with $500 million through revenue
management

 Delta Airlines increased annual revenue with $300 million through revenue management

 Marriott hotels increased annual revenue with $100 million through revenue management

 National Car Rental was saved from liquidation with revenue management

 Canadian Broadcasting Corporation (CBC) increased revenue with $1 million per week

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