What is it about?
• This paper is one of the few papers focus on the dynamic pricing policy about service products with finite capacity. • We propose a new market segment policy based on lead time. • We aim to find the optimal pricing policy for hotels to gain maximal profit by a segmentation marketing strategy. • Our result shows that the pricing strategy based on market segmentation is benefit to both hotels and consumers.
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Why is it important?
As an effective policy which brings the service providers high occupancy rate and generates more profit than fixed pricing, the dynamic pricing strategy is extensively used in the online distribution channel. This paper studies the optimal dynamic pricing strategy based on market segmentation for service products in the online distribution channel taking hotel rooms as an example.
Perspectives
Firstly, the pricing model is built to maximize the hotel profit through a dynamic process. Then the solution methodologies based on Chebyshev's Sum Inequality and dynamic programming are provided for the linear demand case and non-linear demand case, respectively. The optimal number of segments and optimal boundaries can be obtained. The results suggest that an appropriate policy of market segmentation in using of online reservation systems is benefit for the service suppliers as well as the consumers. Finally, an illustration based on a 300-room hotel is provided for the more realistic non-linear case.
Dr Xiaolong Guo
University of Science and Technoogy of China
Read the Original
This page is a summary of: Optimal pricing strategy based on market segmentation for service products using online reservation systems: An application to hotel rooms, International Journal of Hospitality Management, December 2013, Elsevier,
DOI: 10.1016/j.ijhm.2013.07.001.
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