Optimal Overbooking Strategy in Online Hotel Booking Systems

Taiga Saito, Akihiko Takahashi, Noriaki Koide and Yu Ichifuji
Additional contact information
Taiga Saito: Faculty of Economics, The University of Tokyo
Akihiko Takahashi: Faculty of Economics, The University of Tokyo
Noriaki Koide: Joint Support-Center for Data Science Research, Research Organization of Information and systems
Yu Ichifuji: Center for Information and Communication Technology, Nagasaki University

No CIRJE-F-1065, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: The revenue management for online booking systems, which incorporates over-booking by the hotels, is particularly important because of increasing cancellations at the last minute and no-shows which cause serious damage to the management of the hotels. This study proposes a new quantitative overbooking model for online booking systems, where the rival hotels' room charges affect the choice probability of the target hotel. Our model enables a hotel to obtain optimal overbooking strategy and room charge that maximize the expected sales based on its empirical data on the cancellations and the oversale cost per room. Moreover, we present numerical examples of the optimal overbooking strategy and room charge with actual online booking data of two major luxury hotels in Shinjuku area in Tokyo. Furthermore, equilibrium room charges of the hotels are considered, where we find the price competition may lead to signi cantly low levels of room charges and the expected sales.

Pages: 30 pages
Date: 2017-09
New Economics Papers: this item is included in nep-tur
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2017cf1065

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