Tactical revenue management
• Calculates and periodically updates the booking limits
• Resources
– Units of capacity (flight departure, hotel room night, rental
car day)
• Products
– Customers are seeking to purchase those (a seat on Flight
130 from St. Louis to Cleveland on Monday, June 30 –
single resource; A two-night stay at the Sheraton
Cleveland, arriving on March 19 and departing on March
21 – two resources)
• Fare classes
– A combination of a price and a set of restrictions on who
can purchase and when (e.g. group and regional pricing)
• The fact that RM operates fare classes, does
not change much from customers view – he
still sees only the lowest available fare
• Since airlines still respond to the offers made
by the competition, RM supplements rather
than replaces pricing
Tactical revenue management
• Capacity allocation
• Network management
• Overbooking
Capacity allocation
• How many seats (hotel rooms, rental cars) to allow
low-fare customers to book – given the possible future
high-fare demand
• Two-class problem
– Discount customers
– Full-fare customers
• BASIC MODEL – all discount bookings happen before
full-fare bookings
• We maximize expected revenue – incremental costs
and ancillary contribution are zero
• In reality companies should maximize expected total
contribution
• Determine the discount booking limit
• Tradeoff between setting it too high or too
low (spoilage vs. dilution)
•
•
B=60->61
PlaneC=100
–
–
–
–
–
–
–
–
–
•
•
•
•
•
*Dd=50
*Df=45
*86%
**Dd=65
**Df=30
**14%..*6.5%
***Dd=65
***Df=45
***14%..*93.5%
=86%*0+14%*6.5%*190+14%*93.5%*(190-200)
=14%*(6.5%*190+93.5%*(190-200))=>6.5%*190+93.5%*(190-200)
=190—93.5%*200=> Pd—93.5%*Pf>0=>Pd/Pf>93.5%;190/200=95%
86%*0+14%*5=0.7
50%*10000+50%*20000=?