Revenue Management: Research Overview and Prospects

In the forty years since the first publication on overbooking control, passenger reservations systems have evolved from low level inventory control processes to major strategic information systems. Today, airlines and other transportation companies view revenue management systems and related information technologies as critical determinants of future success. Indeed, expectations of revenue gains that are possible with expanded revenue management capabilities are now driving the acquisition of new information technology [see, for example, GARVEY (1997)]. Each advance in information technology creates an opportunity for more comprehensive reservations control and greater integration with other important transportation planning functions. There is now a substantial literature of journal articles, technical reports, and conference proceedings describing the practice and theory of revenue management. This paper provides a survey and bibliography of work in this important area. The paper is organized as follows. In Section 1, we outline the history and current nature of the revenue management problem and discuss some of the complexities that make solution and implementation so challenging. Sections 2 through 5 contain reviews of revenue management research in four key areas—forecasting, overbooking, seat inventory control, and pricing. Most of this review deals with airline revenue management because the airlines have the longest history of development in revenue management. In Section 6, we discuss important areas for future research and conclude our review. A glossary of revenue management terminology is provided in an appendix. Terminology used in this survey that can be found in the glossary is highlighted when first used.