An Evaluation of a Contributionx-Enhancement Opportunity for Hotels

Abstract

This study tested the potential to increase contribution for hotels by applying a room inventory allocation method at the distribution level while accounting for varying costs of booking by channel. The purpose of the study was to answer two questions: (a) Does optimizing room inventory allocation at the rate, length of stay, and distribution channel produce any significant contribution enhancement for hotels, compared to the traditional effort at the level of rate and length of stay? (b) If it does, what are the operating characteristics of those hotels that benefit more than others? The proposed new approach was tested under 32 different simulated hotel-operating environments, which varied by five operating factors. The results show that the amount of contribution enhancement accomplished by the proposed approach varied by the hotel-operating environment, and hotels in 24 operating environments significantly benefited from the new approach.