EMSR Optimization
Optimization is the most fundamental part of revenue management systems, is it is the process used to tailor the set of products being offered to maximize revenue. It typically occurs after untruncation and forecasting.
PassengerSim offers several different optimization algorithms. One widely used algorithm is called EMSR (expected marginal seat revenue), which has a few variants, generally labels as "A", "B", and "C".
ExpectedMarginalSeatRevenue
Bases: RmAction
EMSR (Expected Marginal Seat Revenue) is a leg-based optimization algorithm.
The EMSR (Expected Marginal Seat Revenue) algorithm is a widely adopted heuristic for capacity allocation in revenue management, primarily used to determine how many seats to protect for higher-fare classes in a restricted product marketplace. It works by calculating a booking limit for each fare class, starting with the lowest, to maximize expected revenue.
The "A" algorithm compares each class individually, and is not generally used in practice. The "B" algorithm, often called EMSR-B, aggregates displaced low-fare passengers. This method uses Littlewood's rule with the aggregate demand and average fare to statistically determine optimal protection levels for the remaining higher-priced inventory, effectively balancing the risk of selling a seat cheaply now versus the potential of selling it at a higher price later.
Applying the EMSR algorithm requires a forecast of leg demand by fare class. Protection levels are updated at each decision control point (DCP) based on the latest sales and demand forecasts, allowing for dynamic adjustment to changing booking patterns.