Title: Dynamic Booking Control for Car Rental Revenue Management: A Decomposition Approach

Speaker: Dr Dong Li, the York Management School,

University of York, UK

Time: Mar. 25, 2015 (Wed.), 2:30-4:30 pm

Venue: Room1922, Tongji Building A

Dynamic Booking Control for Car Rental Revenue Management: A Decomposition Approach

— Dr Dong Li, The York Management School, University of York, UK

Different from conventional airline revenue management, car rental revenue management needs to take into account not only the existing bookings but also the lengths of the existing rentals and the capacity flexibility, which yields high-dimensional system state space. In this work, we formulate a single-station booking control problem as a discrete-time stochastic dynamic program over an infinite horizon, which is computationally intractable due to the curse of dimensionality. We propose a decomposition approach to the development of two heuristics. The first heuristic is an approximate dynamic program (ADP) which approximates the value function using the value functions of the decomposed problems. The second heuristic is constructed directly from the optimal booking limits computed from the decomposed problems. Our numerical study suggests that the performances of both heuristics are close to optimum and significantly outperform a commonly used probabilistic non-linear programming (PNLP) heuristic in most of the instances. The dominant revenue performance of our second heuristic is evidenced in a case study using sample data from a major car rental company in the UK, which also sees higher fleet utilisation from our proposed policy. Our results further suggest that the PNLP heuristic is conservative in vehicle movements. It could be still suitable for situations with large demand and low shuttling cost. Otherwise the proposed heuristic should always be the choice.

Bio: Dong Li

Dr Dong Li is a Lecturer in Operations Management in the York Management School, University of York, United Kingdom. His current research revolves around revenue management and pricing, especially in travel, hospitality and tourism sector.  Theoretically he is interested in Approximate Dynamic Programming and their usage in solving complex resource allocation problems. He was also an operations research analyst in Avis Budget EMEA and Intel Corp (Shanghai) for 5 years all together.

Dr Li obtained a PhD in Management Science from Lancaster University, United Kingdom.  He won the Kingsman prize from Lancaster University in 2011 as the best doctoral researcher, and the Operational Research Society PhD prize Runners-up for the best PhD dissertation in the UK the same year. He also holds an MEng in Industrial & Systems Engineering from National University of Singapore, and an MEng and a BEng in Mechanical Engineering from Xi’an Jiaotong University, China