Estimation of passenger sell-up rates in airline revenue management by considering the effect of fare class availability

Aydemir R., Değirmenci M. M., Bilgin A.

Journal of Revenue and Pricing Management, 2023 (ESCI) identifier

  • Publication Type: Article / Article
  • Publication Date: 2023
  • Doi Number: 10.1057/s41272-023-00424-y
  • Journal Name: Journal of Revenue and Pricing Management
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus, ABI/INFORM, Business Source Elite, Business Source Premier, DIALNET
  • Keywords: Exponential distribution, Fare-class availability, Market demand, Sell-up rate
  • Istanbul Technical University Affiliated: Yes

Abstract

This paper introduces a new method for estimating sell-up rates that show a passenger’s propensity to purchase the upper fare class using class-based historical booking data. The performance of models in the literature, such as Direct Observation (DO) and Inverse Cumulative (IC), is not satisfactory when applied to the actual historical booking data since their results do not match the business expectations. We improve these models and design data pre-processing and solution techniques that can be beneficial for practitioners in dealing with historical booking data. Adjusting the past bookings with fare class availability data, our model provides a robust sell-up rate estimation. We examine data of a major European airline in our analysis. Numerical results show that our proposed method decreases MAPE (mean absolute percentage error) significantly.