Determining the optimal group rate in the hotel industry

Abstract

This paper aims to develop an analytical model that prescribes the optimal group rate for hotel group business. Theoretically, this paper fills two gaps in the literature by proposing a model that determines the optimal, not minimum, group rates while considering competing bids. The simulation results show that the optimal group rate is positively affected by the forecasted transient rate and the effect is contingent on the forecasted transient demand. Furthermore, the optimal rate is moderated by group size with respect to both internal (expected transient demand and transient rate) and external (competition) factors respectively.