Optimal market segmentation of hotel rooms-The non-linear case

The optimal market segmentation pricing strategy for rooms of hotels is investigated to determine the optimal number of segments to be used and the accompanying number of rooms and price prevailing in each segment, under the assumption of an aggregate non-linear demand function. A single state-variable dynamic programming model is formulated to maximize profit, and an efficient reduction in the range of search for the solution of the model is outlined. A numerical example is provided for a 400 room hotel with an exponential demand curve.