Title

Flexible Payment Schemes in Hotel Business

Publication Type

Conference Paper

Publication Date

6-2012

Abstract

This paper introduces a flexible payment scheme in the hotel business. When a customer makes a reservation for a hotel room, the hotel offers a payment discount at check-out time if the customer agrees to immediately make a nonrefundable down payment. This scheme protects the hotel from customer cancelations or no-shows resulting from competition among nearby hotels while providing an opportunity for the customer to enjoy the overall payment discount. We find the optimal solution for the amount of down payment and discount, and illustrate the value of the flexible payment for both hotel and customer.

Discipline

Hospitality Administration and Management | Operations and Supply Chain Management

Research Areas

Operations Management

Publication

INFORMS MSOM Conference, 17-19 June 2012, New York

City or Country

New York, NY, USA

Comments

Also presented at POMS-HK International Conference, 6-7 January 2011, Hong Kong

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