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Carnival Optimizes Revenue and Inventory Across Heterogenous Cruise Line Brands

Author

Listed:
  • Justin Beck

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • John Harvey

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Kristina Kaylen

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Corrado Sala

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Melinda Urban

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Peter Vermeulen

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Norman Wilken

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Wei Xie

    (Carnival Corporation & plc, Miami, Florida 33178;)

  • Dan Iliescu

    (Revenue Analytics Inc., Atlanta, Georgia 30339)

  • Pratik Mital

    (Revenue Analytics Inc., Atlanta, Georgia 30339)

Abstract

Carnival Corporation & plc identified the need for a cutting-edge revenue management system; however, existing solutions from the airline and hospitality industries were not compatible with the idiosyncrasies of the cruise domain. As such, the company partnered with revenue analytics to build a complete revenue and inventory management system to meet its requirements. Yield optimization and demand analytics (YODA) is a system that leverages a unique quadratic programming model to jointly determine cruise prices and allocate cabin inventory to multiple cruises (e.g., 14-day and 7-day lengths) offered simultaneously on a given ship. The optimization inputs come from several machine learning algorithms that predict demand. YODA combines these algorithms with an elasticity model derived from an exponential curve to represent the unique price-sensitivity behavior observed in the cruise industry. The system generates millions of price recommendations each day and has been used to price voyages on 65 Carnival ships, approximately one quarter of the ships in the entire cruise industry, since December 2017. During A/B testing, YODA generated a 1.5%–2.5% incremental uplift in net ticket revenue, which is a significant revenue increase because Carnival was a Fortune 300 company in 2019.

Suggested Citation

  • Justin Beck & John Harvey & Kristina Kaylen & Corrado Sala & Melinda Urban & Peter Vermeulen & Norman Wilken & Wei Xie & Dan Iliescu & Pratik Mital, 2021. "Carnival Optimizes Revenue and Inventory Across Heterogenous Cruise Line Brands," Interfaces, INFORMS, vol. 51(1), pages 26-41, February.
    • Handle: RePEc:inm:orinte:v:51:y:2021:i:1:p:26-41
    DOI: 10.1287/inte.2020.1062
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    References listed on IDEAS

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    1. Sharon Hormby & Julia Morrison & Prashant Dave & Michele Meyers & Tim Tenca, 2010. "Marriott International Increases Revenue by Implementing a Group Pricing Optimizer," Interfaces, INFORMS, vol. 40(1), pages 47-57, February.
    2. Barry C. Smith & John F. Leimkuhler & Ross M. Darrow, 1992. "Yield Management at American Airlines," Interfaces, INFORMS, vol. 22(1), pages 8-31, February.
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    Cited by:

    1. Mihai Banciu & Andreas Hinterhuber & Fredrik Ødegaard, 2023. "Revenue management in sports, live entertainment and arts," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 22(3), pages 185-187, June.

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