In the early1980s, a handful of airlines initiated the field of revenue management as a means to increase profitability by solving the problem associated with the imbalance of supply and demand. The average revenue per passenger (yield) was maximised via controlling the limited capacity assigned to different discount levels. The success of revenue management immediately attracted several other industries including, but not limited to, hotels and car rental companies. In his book, Müller-Bungart provides a review of science behind the capacity control techniques as well as recent advancements in the field that includes an overview of the revenue management problem for the broadcasting industry.
The book is organised into three sections. First section is dedicated to revenue management literature and recent advancements. Second, the author discusses how the evaluation of revenue management techniques can be formalised. Third, the implementation of revenue management concept in the broadcasting industry is investigated in details.
The book starts with the definition and science behind the current revenue management methods. Müller-Bungart provides the characteristics of a revenue management problem along with industry applications. The second chapter is dedicated to the review of traditional capacity control and overbooking literature. The author demonstrates the theory and the implementation of the booking limits and bid price controls with detailed examples and illustrations.
In the third chapter, Müller-Bungart deviates from the traditional revenue management and presents the current research topics. The literature related to choice-based revenue management, flexible customers and products are reviewed and several applications are presented to demonstrate these concepts.
In practice, the quality of the solution under different instances is as critical as the time required to solve the problem. Although revenue management techniques are exhaustively tested for their performance, a formal process to create test instances is not established yet. Chapter four proposes a new approach to generate various problem instances to test the quality and the speed of revenue management solutions. Finally, a new technique to populate demand data is introduced and compared with the current ones.
One of the new concepts introduced in the first section of the book is the flexible products. This notion provides a company the flexibility in the process of resource allocation to satisfy the demand. For example, in the cargo industry although customers pay for the shipment of a package from New York to Orlando, the company has some flexibility in the routing of the shipment.
As one might imagine, the flexibility comes with a cost. The company has to choose which resource(s) to utilise to satisfy each unit of demand. The author delineates this revenue management problem in chapter six and provides a detailed treatment of the problem using the broadcasting industry context. The chapter starts with a formal definition of the problem and the mathematical model in which the concept of flexible product is incorporated into the decision process. Next, heuristic and exact solution methodologies are described along with the technical details of their implementation. As a final point, the author tests the proposed methodologies under different instances and provides the results.
In conclusion, the book provides a well-organised overview of capacity control and overbooking theory as well as implementation aspects. The author utilises the broadcasting industry as an example to demonstrate how traditional revenue management techniques can be extended to industries that provide flexible products. It is a perfect reference for academicians and practitioners who are interested in the theoretical advancements in the field of revenue management.
