The benefits of optimising prices to manage demand in hotel revenue management systems

The benefits of optimising prices to manage demand in hotel revenue management systems

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Article ID: iaor20043681
Country: United States
Volume: 12
Issue: 4
Start Page Number: 502
End Page Number: 518
Publication Date: Dec 2003
Journal: Production and Operations Management
Authors: ,
Keywords: service, yield management
Abstract:

We investigate the revenue impact of a new Price Setting Method (PSM) and compare it with the industry standard Bid Price Method (BPM). This comparison is performed via a simulation that was validated by a major hotel chain. In 27 out of the 32 cases, the PSM outperformed the BPM based on statistically significant tests. The PSM produces an average revenue increase of 34%, which can be thought of as an upper bound on the realistic revenue increase.

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