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Hotel Overbooking and Cooperation with Third-Party Websites

Author

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  • Yufeng Dong

    (School of Management, University of Science & Technology of China, Jinzhai Road 96, Hefei 230026, China)

  • Liuyi Ling

    (School of Management, University of Science & Technology of China, Jinzhai Road 96, Hefei 230026, China)

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.

Suggested Citation

  • Yufeng Dong & Liuyi Ling, 2015. "Hotel Overbooking and Cooperation with Third-Party Websites," Sustainability, MDPI, vol. 7(9), pages 1-17, August.
    • Handle: RePEc:gam:jsusta:v:7:y:2015:i:9:p:11696-11712:d:54743
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    References listed on IDEAS

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    Cited by:

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    3. C. I. Chiang & Y. H. Cheng, 2022. "On the Stackelberg game model of the collaboration of a hotel and third-party booking websites," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(1), pages 97-105, February.
    4. Tsaur, Ruey-Chyn & Chen, Chyoug-Hwa, 2018. "Strategies for cross-border travel supply chains: Gaming chinese group tours to Taiwan," Tourism Management, Elsevier, vol. 64(C), pages 154-169.
    5. Guo, Xiaolong & Dong, Yufeng & Ling, Liuyi, 2016. "Customer perspective on overbooking: The failure of customers to enjoy their reserved services, accidental or intended?," Journal of Air Transport Management, Elsevier, vol. 53(C), pages 65-72.
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    7. Yaqin Lin & Chun-Hung Chiu, 2023. "Effectiveness of Discount Incentives in Carbon Reduction: Impact of Customer-Perceived Value Sacrificed for Green Hotels," Sustainability, MDPI, vol. 15(16), pages 1-21, August.

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