Seasonal balancing of revenue and demand in hotel industry: the case of Dubai City

Abstract

For fact, a strong demand seasonality is observed in hotel industry, which needs early planning to prevent revenue declines. Cost cuts, although sometimes deemed tolerable, no longer help because expenditures have thresholds that hardly can be crossed. Increasing the revenue by raising rates, on the other side, adversely affects the level of demand. In low seasons, travelers are more sensitive to prices, and therefore, higher rates turn customers away to other rivals. To address the compromise between demand, supply, and prices, this work contributes to the existing literature by proposing a model that tests the balance of seasonal demands and prices to maximize hoteliers’ profit. Specifically, we present an approach that finds the seasonal elasticity of demand at the optimum profit. The model is capable of assessing the balance of prices with the market demand, which helps in the assessment of hotels. To validate the model, data sets from Dubai international and domestic hotels were collected and used for benchmarking. It was found that international hotels confront higher seasonality as compared to local hotels. Only couple of hotels (Local and International) demonstrated successful efforts in seasonal balancing of prices with the demand. The demand was also found to be more elastic in the low seasons owing to high room offerings, while less elasticity is observed in the high seasons. The model acts as an effective tool for placing hotels on the board of price and demand, which assists the hoteliers to gain more insights toward benchmarking and evaluation.

Machine Learning for short-term property rental pricing based on seasonality and proximity to food establishments

“…Deboosere et al (2019) and Casamatta et al (2022) found that hosts adjust their prices based on the holiday calendar and seasonal demand. Alrawabdeh (2022) highlights that different international and local hotels may exhibit varying price fluctuations throughout the year. We find there is a difference between professional and opportunistic owners.…”

“…Seasonality plays a pivotal role in shaping pricing dynamics and performance disparities among STRs, as noted by various researchers. Several authors (Aznar et al, 2018;Magno et al, 2018;Falk et al, 2019;Sainaghi et al, 2021;Casamatta et al, 2022;Yilmaz et al, 2022;Alrawabdeh, 2022) consider seasonality one of the most important factors explaining price and performance differentials among Airbnb properties. They find that during the summer or peak season, for example, when school starts, a higher degree of market power is more probable, impacting pricing and performance within the Airbnb market.…”

“…To demonstrate the existence of specific seasonal pricing patterns in the tourism industry, Alrawabdeh (2022) highlights that different international and local hotels may exhibit varying price fluctuations throughout the year.…”

Pricing and demand management of air tickets using a multiplicative newsvendor model

“…Seasonality and its effects are investigated in the article by developing elasticity model to benchmark airlines strategic performance. On the other hand, Alrawabdeh ( 2021 ) argues that variability is a recurring phenomenon, and therefore, seasonality in customer demand should be studied and forecasted.…”

The continuing evolution of revenue management science

“…It has always been a case that seasonality is an inherent issue in the hotel industry. Alrawabdeh ( 2021 ) proposes a model that tests the balance of seasonal demands and prices to maximize hoteliers’ profit. Specifically, the authors present an approach that finds the seasonal elasticity of demand at the optimum profit.…”