Using competition and market information to optimize a tour operator’s pricing decisions

Due to the rising use of internet, the business of e-commerce has grown rapidly in the last years. The easy access to information leads to transparent markets with high competition due to high price sensitive customers. Not only the customers benefit from easy access to information, companies can also benefit from the available market information which is available in many sectors. In this report we propose the Dependent Region Dynamic Pricing (DRDP) model for tour operators. The DRDP model can be used for the dynamic pricing decision of products which make use of both flight and hotel capacities. The DRDP model is an extension of the dynamic pricing model proposed in [50]. The DRDP model incorporates both competition between regional clusters and market information whereas the model from [50] assumes independent regions. The DRDP model makes use of a two-step structure. Therefore, the model is still workable in terms of computation times.