Hotel dynamic pricing, stochastic demand and covid-19

Abstract

We develop an innovative framework to study how hoteliers apply inventory control and price discrimination taking into account seasonality. We end up with a time-varying model that, using publicly available information, connects the early booking and last-minute pricing decisions. In doing so, we account for the expected demand size and price elasticity, the inventory put on sales, and the last-minute demand shocks. An analysis focused on 100 hotels in Milan (Italy) shows that during the Covid-19 last-minute discounts/surcharges remain stable over long periods while the role of advance booking as a lever for revenue management is reduced. Moreover, the pandemic has increased the last-minute adjustment at the short advance booking, especially for midweek days.