Travel Package Modeling: Optimal Bidding Strategy of Tour Operator to Cooperative Hotels

Abstract

In the travel package industry, in order to obtain stable and sufficient source of hotel rooms for package products, the tour operators would like to cooperate with hotels located at the tourism destination. Meanwhile, the hotels also appreciate the cooperation as a way to improve occupancy rate and then revenue. This paper develops models of travel package in several scenarios to analyze the relationship between the tour operator and the hotel. Through theoretical analysis and numerical studies, this paper finds that the tour operator will bid a low wholesale room rate to the hotel with high capacity or/and a small number of individual tourists. On the other hand, the hotel with large capacity or/and less individual tourists will reserve more rooms for the travel packages, while the one with high room rate and stable source of individual tourists is not likely to remain so many rooms for the tour operator.