Revenue Optimization Initiative
Revenue optimization (also called revenue management or yield management) has gained attention recently as one of the most economically significant and rapidly growing applications of operations research. It has grown from its origins as a relatively obscure practice among a handful of major airlines in the post-deregulation era in the U.S., to its current status as a mainstream business practice, with its own supporting industry of established consulting firms and range of industry users from Walt Disney Resorts to National Car Rental. Major airlines including American, British Air, Continental, Lufthansa, Northwest and SAS have large staffs of developers and analysts working on revenue management. Major consulting/software firms such as PROS, Sabre and Tallus each have hundreds of professionals devoted to their revenue management practices, working on a range of activities from business consulting to software development to mathematical methodology.
At the same time, research on the methodology behind revenue management has exploded. In academic circles, the number of published papers on revenue management has increased dramatically in he last ten years. INFORMS (the Institute for Operations Research and Management Science),is the leading professional society of Operations Research and has started a Revenue Management Section of their society. An academic journal on the subject is being launched. The Deming Center helped to initiate, and continues to co-sponsor, the annual INFORMS Revenue Management Section Conference. One of the co-directors of the initiative, Garrett van Ryzin, co-authored the first comprehensive tome on revenue management in 2004, entitled "The Theory and Practice of Revenue Management."
Objectives
The first initiative of its kind at a major university, the Revenue Optimization Initiative (ROI) seeks to build a fundamental understanding of the theory and practice of revenue management. Its goal is to advance understanding of revenue management, including studies of pricing models, capacity allocation, forecasting, consumer behavior estimation, market mechanism design (e.g. auctions) and practical elements of revenue management in various industries. The ROI will support focused education and professional development activities, and will sponsor fundamental research.
