Make me an Offer: Forward and Reverse Auctioning Problems in the Tourism Industry
This addresses uneven demand and economic impacts for tourists and hoteliers in the post-covid era, but it is incremental as it adapts existing auction concepts to a specific domain.
The paper tackles seasonality in tourism by developing forward and reverse auction systems for hotel rooms, showing significant benefits for both hoteliers and customers through mathematical models and optimization techniques.
Most tourist destinations are facing regular and consistent seasonality with significant economic and social impacts. This phenomenon is more pronounced in the post-covid era, where demand for travel has increased but unevenly among different geographic areas. To counter these problems that both customers and hoteliers are facing, we have developed two auctioning systems that allow hoteliers of lower popularity tier areas or during low season periods to auction their rooms in what we call a forward auction model, and also allows customers to initiate a bidding process whereby hoteliers in an area may make offers to the customer for their rooms, in what constitutes a reverse auction model initiated by the customer, similar to the bidding concept of priceline.com. We develop mathematical programming models that define explicitly both types of auctions, and show that in each type, there are significant benefits to be gained both on the side of the hotelier as well as on the side of the customer. We discuss algorithmic techniques for the approximate solution of these optimization problems, and present results using exact optimization solvers to solve them to guaranteed optimality. These techniques could be beneficial to both customer and hotelier reducing seasonality during middle and low season and providing the customer with attractive offers.