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| The overbooking problem with downward substitution for a "Hotel + OTA (online travel agent)" dual-channel supply chain is investigated. Under the Merchant model framework, the OTA's optimal purchasing quantity and the hotel's optimal overbooking decisions are analyzed. The analysis suggests that a substitutable overbooking strategy (free upgrade is permitted) is the best for the hotel. However, the optimal decisions depend on parameters such as wholesale price, arrival rate, the probability of reserving luxury rooms, and demand uncertainty. The OTA's purchasing quantity for economy rooms decreases in wholesale price, the probability of reserving luxury rooms, and online demand uncertainty. The hotel's optimal overbooking level decreases in the arrival rate and the probability of reserving luxury rooms and increases in wholesale price and offline demand uncertainty. Moreover, the hotel can affect the OTA's purchasing quantity decisions by adjusting wholesale prices and, then, accordingly determine the optimal overbooking level to maximize the expected revenue. |
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| Keywords:Yield management; Overbooking; Substitution; Dual-channel |
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