A decomposition approach in network revenue management: Special case of hotel

Abstract

In this article, we address the multiple-night stay hotel revenue management. Using a decomposition method, we transform the multiple-night stay revenue management into a single night. To this end, we define effective arrival rate for each night that is derived from all the booking requests that contain the night, excluding the possible ‘customer losses’. A customer is labeled ‘loss’ either because of the existence of an expensive night in his itinerary or because of a stock-out occurrence over his stay. We calculate the probabilities of these two incidents and then update the effective daily arrival rate, accordingly. In this way, we can use the classical single-night revenue management, even with multiple-night stays.