Dual-channel ticketing and pricing strategies in cruise revenue management

Abstract

ABSTRACT To address cruise companies’ revenue loss caused by over-reliance on indirect channels for ticket distribution, we design a dual-channel pricing policy that includes dynamic horizontal and vertical pricing regimes aiming to maximizing cruise companies’ revenue. In the horizontal pricing regime, cruise companies and travel agencies offer uniform prices to consumers dynamically. In the vertical pricing regime, cruise companies provide dynamic commissions to travel agencies based on their sales performances. In view of the dynamic customer arrivals and uncertain demand, we model the dynamic dual-channel pricing decisions as a Markov decision process, and solve the model by means of a reinforcement learning method. Our computational results show that dual-channel pricing policies generated by our method outperform the classic Expected Marginal Seat Revenue method, which has been widely used in similar industries such as airlines for revenue management. In addition to the various features of dual-channel in ticket distribution, our model also takes into account customers’ onboard consumptions, which is a critical source of revenue in cruise industry but has never been considered in the literature. As a result, our model and computational results provide insightful implications for cruise revenue management.