Conquering the one-size-fits-all disease: How to put revenue management into action
Abstract:In this practice article, we discuss how we made Revenue Management work for a large tour operator. Unlike others before, we did not implement a Revenue Management model from the airline industry, but instead created a tailored model for the tour operator. This model is unique in that it brings together classical pricing techniques and Revenue Management. It uses classical demand curves to optimize the price while also taking into account that different products fight for the same capacity. Moreover, the model determines the price path over time and thus determines when to move from one price to another. We discuss why this model works where standard booking limits or bid-prices, do not. With this, we stress the importance of letting the model fit your business. Further, we argue that implementing Revenue Management without taking organizational issues into account is fraught with potential failure. We discuss how we implemented Revenue Management for the tour operator, which led to stimulating and impressive results.
Document Type: Research Article
Publication date: November 1, 2011