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Service Package Switching in Hotel Revenue Management Systems
Author(s) -
Baker Tim,
Murthy Nagesh N.,
Jayaraman Vaidyanathan
Publication year - 2002
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.2002.tb01638.x
Subject(s) - revenue , revenue management , service (business) , computer science , demand forecasting , baseline (sea) , operations research , key (lock) , yield management , business , operations management , marketing , finance , economics , engineering , oceanography , computer security , geology
Revenue Management Systems (RMS) are commonly used in the hotel industry to maximize revenues in the short term. The forecasting‐allocation module is a key tactical component of a hotel RMS. Forecasting involves estimating demand for service packages across all stayover nights in a planning horizon. A service package is a unique combination of physical room, amenities, room price, and advance purchase restrictions. Allocation involves parsing the room inventory among these service packages to maximize revenues. Previous research and existing revenue management systems assume the demand for a service package to be independent of which service packages are available for sale. We develop a new forecasting‐allocation approach that explicitly accounts for this dependence. We compare the performance of the new approach against a baseline approach using a realistic hotel RMS simulation. The baseline approach reflects previous research and existing industry practice. The new approach produces an average revenue increase of at least 16% across scenarios that reflect existing industry conditions.