Hotel overbooking capacity rationing and cooperation with third-parties: a two-period optimisation model

Abstract

We propose a two-period optimisation model for a hotel revenue management (RM) problem where overbooking capacity rationing and cooperation with third-party websites are simultaneously considered. In a Stackelberg game structure the hotel first sets the price and overbooking and rationing levels and as the followers third-parties decide their effort levels by a Nash game. The proposed model is solved using a genetic algorithm. An extensive numerical study is performed to investigate the effects of multiple night stays hotel effort level and hotel capacity on the decisions and the hotel profit. It is shown that the value of capacity rationing increases with multiple night stays and the expected profit of the third-parties is decreasing with the hotel effort level but the relation between the hotel effort level and profit is not monotone. As the hotel capacity is expanded the effort level of the third-parties and the hotel profit increase. [Received: 1 December 2021, Accepted: 26 May 2023]