Hotel Overbooking and Cooperation with Third-Party Websites

Abstract

Hotels cooperate with third-party websites to enhance their competitive position and attain sustainable development in the era of e-commerce. Furthermore, hotel managers overbook to hedge against last-minute cancellations and customer no-shows. This paper discusses pricing and overbooking strategies of a hotel in the context of cooperation with multiple third-party websites and analyzes how these strategies influence the cooperation process. The increase in profits resulting from the overbooking strategy is also examined. A model of a Stackelberg game between the hotel and third-party websites and a Nash game among the third-party websites are developed to analyze the process. Results indicate that the compensation coefficient has a slight influence on hotel pricing strategy, but causes a sharp decrease in overbooking level. As the hotel demands to lessen the probability of denying under higher compensation rate, the third-party websites would exert less sales effort to reduce the demand of online customers. Results also show that under a given market demand, hotel effort only serves to redistribute market shares among the hotel and third-party websites, without influencing hotel pricing and overbooking decisions. Specifically, the market shares of the third-party websites decrease in the effort level of the hotel resulting from an increase in the hotel market share. Finally, in the numerical example where one hotel and two websites are analyzed, hotel overbooking strategy improves hotel profit by 4.20%, whereas profit improvements for Websites 1 and 2 are as high as 5.26% and 5.21%, respectively. Managerial implications of the study are also provided.

The Effects of Perceived Value, Website Trust and Hotel Trust on Online Hotel Booking Intention

“…In prior work, the perceived value has been considered as a salient factor to predict individuals' purchase behavior; perceived value could play an important role for those who want to make hotel reservations using third-party online booking sites [5,6]. For example, according to Krasna's work [7], the perceived value influences consumers' decision on both hotel choice and booking intention [8], since the value was closely related to price and quality.…”

The Role of Sustainable Service Innovation in Crafting the Vision of the Hospitality Industry

“…Innovation, the heart of success in the hospitality industry, enables hotels to adopt novel ideas, improve service processes, enhance operational efficiency levels, meet customer needs, earn sales and achieve profitability, engage in corporate social responsibility and maintain competitive advantages in rapidly-changing markets [1][2][3][4][5]. Furthermore, when hotel companies strive for sustainability, this may be conducted to achieve competitiveness through organizational and technological innovations via sustainable practices [6][7][8][9][10][11].…”

Application of overbooking model to college admission at The Citadel

“…Overbooking started and has been practiced as a revenue management tool for improving the capacity utilization in airline industry (Shlifer and Vardi, 1975; Rothstein, 1985; Belobaba, 1989; Suzuki, 2002, 2006; Karaesmen and van Ryzin, 2004; Klophaus and Pölt, 2007). It has also been used in hotel industries (Hadjinicola and Panayi, 1997; Baker and Collier, 1999; Toh and Dekay, 2002; Capiez and Kaya, 2004; Phumchusri and Maneesophon, 2014; Dong and Ling, 2015; Ivanov, 2015; Krawczyk et al., 2017; Riasi, 2018) and other hospitality industries such as car rental, restaurants, health care providers, etc. (Carroll and Grimes, 1995; Kim and Giachetti, 2006; Tse and Poon, 2016).…”