Mathematical Models for Hotel Yield Management

Effective management practices in the tourism and hotel area have seldom been more important than at the present time. Pricing decisions cannot be taken without serious thought. The key idea is to formulate a pricing strategy of a provider as a sequential decision problem, which can be transformed into an optimal control problem. The yield management can therefore be understood as a new application field for the model based prediction control (MPC). It can be shown that the hotel yield management problem can be cast as a MPC feedback control problem. The article presents convenient demand modeling along with final problem formulation that is inspired by MPC. Final formulation integrates various economy phenomena (service substitution, overbooking) and produces quick feasible solution that is based on quadratic programming algorithm.