Discussion Papers 2017

CIRJE-F-1065	"Optimal Overbooking Strategy in Online Hotel Booking Systems"
Author Name	Saito, Taiga, Akihiko Takahashi, Noriaki Koide and Yu Ichifuji
Date	September 2017
Full Paper
Remarks	Revised as "Application of Online Booking Data to Hotel Revenue Management" in CIRJE-F-1102 (2018)

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 nd the price competition may lead to signicantly low levels of room charges and the expected sales.
Keywords:

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 nd the price competition may lead to signicantly low levels of room charges and the expected sales.

Keywords: