A Multi-Period Optimization Model for Service Providers Using Online Reservation Systems: An Application to Hotels.

Ming Xu,Xiaoming Li,Xiaoyang Wang,Yan Jiao,Qingfeng Cao,Yongtang Shi

doi:10.1371/journal.pone.0128574

Ming Xu, Xiaoming Li + Show 4 more

Open Access

https://doi.org/10.1371/journal.pone.0128574

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Abstract

This paper presents a multi-period optimization model for high margin and zero salvage products in online distribution channels with classifying customers based on number of products required. Taking hotel customers as an example, one is regular customers who reserve rooms for one day, and the other is long term stay (LTS) customers who reserve rooms for a number of days. LTS may guarantee a specific amount of demand and generate opportunity income for a certain number of periods, meanwhile with risk of punishment incurred by overselling. By developing an operational optimization model and exploring the effects of parameters on optimal decisions, we suggest that service providers should make decisions based on the types of customers, number of products required, and duration of multi-period to reduce the loss of reputation and obtain more profit; at the same time, multi-period buying customers should buy products early. Finally, the paper conducts a numerical experiment, and the results are consistent with prevailing situations.

Highlights

The rapid development of E-commerce and Mobile-business has increased the number of consumers who are willing to purchase products and services online
During long-term stay (LTS), rooms reserved by LTS customers should be regarded as a whole product
The proposition clearly demonstrates that the decisions are related with unit penalty cost, number of rooms required by LTS customers, duration of LTS, and expected profit during LTS, and number of rooms overbooked at the reservation time for LTS

Summary

Introduction

The rapid development of E-commerce and Mobile-business has increased the number of consumers who are willing to purchase products and services online (e.g., flight tickets, hotel rooms, and car rentals). If no room is available even for one day within the LTS, the hotel will not reserve rooms for LTS customers due to the penalty cost incurred with overbooking [9,10,11,12]. In order to obtain maximal profit for a certain number of periods, service providers should make optimal decisions with trade-off between opportunity incomes obtained by multi-item buying and penalty cost incurred by overselling. We aim to (1) determine the optimal decision rule for hotels facing LTS requests, and (2) analyze the effects of duration of stay, number of rooms for LTS, reservation time for LTS, and unit penalty cost with overbooking on the decision of the hotel.

Literature Review

Conclusions and Further Research