Using mathematical models in the hotel industry: Maximizing revenues through discount strategies

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Title: Using mathematical models in the hotel industry: Maximizing revenues through discount strategies
Author: Meuwissen, Karin
Abstract: Mathematical modeling is an effective tool when maximizing revenue in hotels. With over 120,000 different combinations of variables and elements to consider when maximizing revenue, the process of finding the most lucrative combination can be time consuming and costly to hotels. An effective mathematical model assists in reducing the guesswork involved. This study will demonstrate how the implementation of discounts reduces revenue loss by forcing pre-payment and increasing occupancy levels. In an effort to reduce revenue loss, hotels have implemented many strategies such as using credit card guarantees, demanding pre-payment, and offering discounts, all of which are used to reduce the no-show rate. A careful balance must be found, as offering a large discount to reduce the no-show rate can result in as much revenue loss as a high no-show rate. A mathematical model, used in combination with good judgement and managerial expertise, can assist in finding the discount necessary to maximize a hotel's daily revenue.
Record URI: http://hdl.handle.net/1850/14565
Date: 2011-11-04

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