Carnival Optimizes Revenue and Inventory Across Heterogenous Cruise Line Brands

Justin Beck (), John Harvey (), Kristina Kaylen (), Corrado Sala (), Melinda Urban (), Peter Vermeulen (), Norman Wilken (), Wei Xie (), Dan Iliescu () and Pratik Mital ()
Additional contact information
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

Interfaces, 2021, vol. 51, issue 1, 26-41

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.

Keywords: revenue management; cruise lines; machine learning; optimization; quadratic programming; CART; Edelman Award (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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