Performance measurement of revenue management systems

Abstract

Revenue management (RM) systems help firms in enhancing their revenues by allocating capacity to those customers who value it the most. The revenue enhancement is largely affected by demand, competition, seasonality and other external factors. It is necessary to isolate the effect of such external factors while measuring the performance of RM systems. This paper discusses different ways of measuring performance of RM systems by reviewing the relevant literature, and it discusses the merits and demerits of the currently used performance metrics. It provides a framework for developing performance measurement metrics, and describes how these measures can be used to create a dashboard for monitoring performance of RM systems. The proposed framework considers the perspective of the RM decision makers and customers, and evaluates performance of the RM systems for the forecasting, inventory control and overbooking stages of revenue management.