Composite of support vector regression and evolutionary algorithms in car-rental revenue forecasting

In the car-rental industry, it is generally assumed that a 1% increase in price contributes an 8% profit increment. Therefore, pricing is of priority concern in revenue management. Accurately forecasting monthly revenue per unit (RPU) (per car) has received increasing attention owing to its ability to provide a benchmarking performance index for annual pricing. However, RPU in the car-rental industry suffers serious nonlinearity. Recently, support vector regression (SVR) has been successfully applied to solve nonlinear regression and time series problems. This study elucidates the feasibility of using SVR to forecast RPU. Moreover, the parameters of a SVR model are derived using the immune algorithm (IA). Subsequently, RPU data from DTAG (Dollar Thrifty Automotive Group, USA) are used to illustrate the proposed SVRIA (support vector regression with immune algorithm) model. The empirical results reveal that the proposed model outperforms the other two models, namely the Holt-Winters (HW) model and the seasonal HW (SHW) model. Consequently, the SVRIA model provides a promising alternative method of forecasting RPU. Index Terms-Support vector regression (SVR); immune algorithm (IA); Holt-Winters (HW) model; seasonal Holt-Winters (SHW) model; car-rental industry; revenue management.

[1]  Brian Archer,et al.  Demand forecasting and estimation. , 1987 .

[2]  Ping-Feng Pai,et al.  Forecasting regional electricity load based on recurrent support vector machines with genetic algorithms , 2005 .

[3]  Wei-Zhen Lu,et al.  Potential assessment of the "support vector machine" method in forecasting ambient air pollutant trends. , 2005, Chemosphere.

[4]  J Timmis,et al.  An artificial immune system for data analysis. , 2000, Bio Systems.

[5]  Ping-Feng Pai,et al.  Software reliability forecasting by support vector machines with simulated annealing algorithms , 2006, J. Syst. Softw..

[6]  Ping-Feng Pai,et al.  A hybrid ARIMA and support vector machines model in stock price forecasting , 2005 .

[7]  Mohamed Mohandes,et al.  Support vector machines for wind speed prediction , 2004 .

[8]  R. E. Kalman,et al.  New Results in Linear Filtering and Prediction Theory , 1961 .

[9]  Mark Dougherty,et al.  SHOULD WE USE NEURAL NETWORKS OR STATISTICAL MODELS FOR SHORT TERM MOTORWAY TRAFFIC FORECASTING , 1997 .

[10]  R. E. Kalman,et al.  A New Approach to Linear Filtering and Prediction Problems , 2002 .

[11]  Shouyang Wang,et al.  Forecasting stock market movement direction with support vector machine , 2005, Comput. Oper. Res..

[12]  Peter R. Winters,et al.  Forecasting Sales by Exponentially Weighted Moving Averages , 1960 .

[13]  William J. Carroll,et al.  Evolutionary Change in Product Management: Experiences in the Car Rental Industry , 1995 .

[14]  Francis Eng Hock Tay,et al.  Modified support vector machines in financial time series forecasting , 2002, Neurocomputing.

[15]  Zongben Xu,et al.  Three improved neural network models for air quality forecasting , 2003 .

[16]  Kazuyuki Mori,et al.  Immune Algorithm with Searching Diversity and its Application to Resource Allocation Problem , 1993 .

[17]  Daniel B. Fambro,et al.  Application of Subset Autoregressive Integrated Moving Average Model for Short-Term Freeway Traffic Volume Forecasting , 1999 .

[18]  F. Tay,et al.  Application of support vector machines in financial time series forecasting , 2001 .

[19]  Kyoung-jae Kim,et al.  Financial time series forecasting using support vector machines , 2003, Neurocomputing.

[20]  Torsten Reiners,et al.  Modeling and solving the short-term car rental logistics problem , 2006 .

[21]  Wei-Chiang Hong,et al.  An Improved Neural Network Model in Forecasting Arrivals , 2005 .

[22]  M. Geraghty,et al.  Revenue Management Saves National Car Rental , 1997 .

[23]  Ping-Feng Pai,et al.  Support Vector Machines with Simulated Annealing Algorithms in Electricity Load Forecasting , 2005 .

[24]  Ronny Aboudi,et al.  A Synthesis of Tactical Fleet Planning Models for the Car Rental Industry , 2003 .

[25]  M. El-Hawary,et al.  Load forecasting via suboptimal seasonal autoregressive models and iteratively reweighted least squares estimation , 1993 .

[26]  Alan S. Perelson,et al.  The immune system, adaptation, and machine learning , 1986 .