Flexible Payment Schemes in Hotel Business
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 can...
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| Main Authors: | , , |
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| Format: | text |
| Language: | English |
| Published: |
Institutional Knowledge at Singapore Management University
2012
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| Subjects: | |
| Online Access: | https://ink.library.smu.edu.sg/lkcsb_research/3482 |
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| Institution: | Singapore Management University |
| Language: | English |
| Summary: | 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. |
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