Synopsis of the Problem Studied
A basic problem in the casino industry is determining which reservations to accept and which to deny. The profitability of a customer has little to do with the hotel room and everything to do with the customer’s gambling behavior. Harrah’s Cherokee Casino and Hotel, is very different from the typical industry structure. Casino profits are used to better the lives of the immediate Cherokee community. Funds are used to support healthcare, education, and standard of living in the Cherokee community. The Cherokee’s rural location and long distance from large metropolitan cities is one challenge faced by the casino. On the other hand, the location of the Cherokee gives it a natural monopoly in the area. Unlike most casinos, the Cherokee does not serve alcohol and prohibits table games at the casino. This has made the analytic approach, pioneered by Harrah’s, vital to the Cherokee’s profitability. Despite these shortcomings, the Cherokee carries a 98.6 percent occupancy rate and return 60 percent margin on revenue to the Cherokee tribe. Scale and Scope of the Problem
Revenue management systems typically allow users to see between 3 and 7 percent improvements in yield revenue. However, the Harrah’s chain has seen 15 percent improvements. The Harrah’s Cherokee Casino and Hotel is the company’s largest contributor to these improvements. The Cherokee is a single hotel and casino facility, located in Cherokee, North Carolina. It resides at hours away from the nearest metropolitan area, doesn’t serve alcohol, and has limited gambling offerings, yet has defied the odds in the hotel and casino industry. Revenue management systems in the casino industry differ from other industries, in that, different pricing and customer-segmentation strategies are necessary. Furthermore, a customer’s willingness-to-pay, in the casino industry, is extremely diverse, driving profitability. When the Cherokee opened, its revenue management...
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