3041 - You expect to pay more for a hotel when a c ity is...

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You expect to pay more for a hotel when a c ity is full of conventioneers and to pay less a t a resort during the off season. That’s what dynamic pricing is all about. Most people understand that the prices for h otel rooms and airline tickets change all the t ime. We accept it without asking too many q uestions. Travel and hospitality companies h ave learned to tailor their pricing to the curre nt supply and demand. PriceGain can help th ese companies improve profits further by opt imizing their pricing systems. The travel and hospitality industry presents many pricing challenges. It is very competiti ve. Demand changes constantly based on ec onomic conditions and other external factors. They offer wide ranges of products and serv
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ices that customers may value or devalue ac cording to whim and fashion. Airlines, hotels, tour operators, cruise lines, and car rental companies have implemented some of the most sophisticated decision sup port tools available to price their services. In fact, they have lead the way and have been working to optimize prices based on supply and demand since the 1970’s. They have bec ome very good at not only adapting prices b ut also at predicting demand; it’s quite an art. Travel and hospitality companies are past m asters at dynamic pricing. But how can they improve?
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The basic approach is fairly straightforward and easy to understand. Typically, these com panies use predefined price points in their de mand forecasts and then have several price o ptimization models to choose from. One maj or challenge is to make sure that the predefin ed price points are the right ones for the situ ation. For example, a hotel might have a standard r oom with six different standard price points ranging from $200 to $325. One question th ey must answer is, are those the right price p oints for a standard room in relationship to t
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This note was uploaded on 12/21/2011 for the course ECON 214 taught by Professor Bayemichael during the Spring '09 term at HKU.

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3041 - You expect to pay more for a hotel when a c ity is...

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