With 4,437 hotels and 647,161 rooms, InterContinental Hotel Group (IHG) is the worlds largest hotel group in
Question:
Questions for the Opening vignette
1. Describe the challenges faced by IHG during development of their retail price optimization system.
2. Besides the hotel business in the hospitality industry, explain at least three other areas where an optimization model could be used.
3. What other methods could be used to solve IHG’s price optimization problem?
What we can Learn from this vignette
IHG has been doing business using manual price optimization methods for a long time and it seems to have worked for them. However, sometimes business environments change, which renders existing methods of running a business obsolete. IHG used data analytics and mathematical optimization methods to revolutionize revenue management. The price optimization model was a combination of different operations research methods. What is also important is that such decisions are eventually implemented using a decision system that is available to each client hotel. They do not have to know anything about the underlying decision methods to be able to use the recommendations made by the system.