With a new mathematical method, hotels can receive on average 5% more turnover in the long term when taking online reviews into account. Dirk Sierag, PhD student of Centrum Wiskunde & Informatica (CWI) in Amsterdam, analysed with historical data the behaviour of consumers booking rooms. Based on the results he designed mathematical models that can support hotels in determining optimal prices of hotel rooms. He graduated on 30 March at VU University on his PhD thesis ‘Revenue Management in the Hotel Industry’. The research results can also be applied to movies, concerts, sporting events and, for example, Uber taxi rides.
During his PhD research Sierag studied which factors are important for booking hotel rooms, and how hotels can fully reflect this to maximize their profits, for example, by adjusting their prices. The models he developed take into account cancellation behaviour, the impact of online reviews and, for instance, the uncertainty in demand.
Sierag explains: “Reviews have a two-sided effect, which complicates the price optimisation: on the one hand, reviews have an impact on the demand, and on the other hand, the customer’s perception of the price-quality ratio affects his review or rating. In the long term it may be beneficial for the hotel to set a lower price at first. As the customer will then give a positive rating. This results in a higher demand for the hotel, providing higher revenues in the long run. I also see opportunities to apply my models to collaborative consumption, where products or services are shared among relative strangers, like CouchSurfing, Airbnb, Blablacar, Lyft and Uber.”
Sierag did his research in the Stochastics research group of the CWI. It was co-financed by the Dutch Organisation for Scientific Research (NWO) as part of the mathematics cluster Stochastics: Theoretical and Applied Research (STAR) and by the Ministry of Education, Culture and Science through the Regional Attention and Action for Knowledge circulation (RAAK) and the Foundation Innovation Alliance (SIA).
More information:
- Stochastics research group at CWI
- Supervisors: Prof. R.D. van der Mei (CWI and VU) and prof. dr. A.P. Zwart (CWI and VU)
co-promoters: Prof. G.M. Koole (VU) and Prof. J. I. van der Rest (UL).
Picture: Shutterstock.
