Hotel's online booking segementation for heterogenous customers

The online reservation system (ORS) is widely used in the hospitality industries. This paper studies the hotel's optimal pricing policies for two types of contracts: booking without prepayment and booking with prepayment. The hotel adopts these two contracts to segment heterogenous customers through the ORS. We get the hotel's three possible pricing strategies and the corresponding payoffs. It is found that the hotel can segment the customers effectively if it employs two types booking contracts by proper pricing strategies. Through comparison, the results show that when the variable operational cost is high, the hotel will conduct the second contract; otherwise, the hotel will conduct the first contract.