Revenue management of hotel industry in Hong Kong

Abstract

Revenue management is a method for profitably managing capacity that used in the hospitality industry. Overbooking and allocation of perishable assets are the techniques which commonly used. The hotel-operating environment in Hong Kong is highly competitive, in order to survive and generate more revenue, the use of perishable assets is critical. Hotel room is perishable, once the room is not occupied for a night, that night's revenue will loss perpetually. Overbooking is used to reduce the vacancy generated by cancellation and no-show. Moreover, the number of rooms that should be sold at various rate levels is an issue. The trade-off between reserve more rooms for higher rate but may lead to empty and fills the rooms with low-price customer but lost revenue from selling it at higher rates should be defined. In Hong Kong, setting the reservation level and overbooking level usually relies on the experience of the Director of Rooms. Scientific and automatic system for setting the reservation and price levels is necessary for improve the accuracy. This research (1) organize the existing literature, (2) develops a simulation model to reproduce realistic hotel reservation system, (3) compares the performance of chosen heuristics in different operating environments and the results of the simulation model will be presented.