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THE BENEFITS OF OPTIMIZING PRICES TO MANAGE DEMAND IN HOTEL REVENUE MANAGEMENT SYSTEMS
Author(s) -
BAKER TIMOTHY K.,
COLLIER DAVID A.
Publication year - 2003
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/j.1937-5956.2003.tb00217.x
Subject(s) - revenue management , revenue , yield management , business , total revenue , revenue model , revenue center , microeconomics , operations management , industrial organization , econometrics , operations research , computer science , economics , finance , mathematics
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.