Modeling a cruise line revenue management problem

The success of cruise line revenue management at the company which is studied in this article depends on pricing and assignment of room capacity. Market demand is typically defined by such criteria as view requirements, bedding requirements, room locations and amenities. The essence is to price each market segment and allocate cruise room capacity at the same time in order to maximize the total revenue potential. Side constraints include capacity limits on lifeboats and personnel requirements, for example, the number of baby counselors (required by law). It is also important to follow the business rules such as those pertaining to refundable tickets. However, this article’s focus and the key priority is to develop a linear model that can facilitate demand forecasting, which not only considers pricing and room assignment, but also considers potential onboard expenses of customers. A numerical test is conducted based on production data. The results indicate that the solution obtained through this model is valid in practice and shows significant annual revenue increase compared with the previous system.