Title

Understanding Discount Program Risk in Hospitality: A Monte Carlo Approach

Document Type

Article

Abstract

This study exhibits the usefulness of simulation analysis in understanding discount program risk from hospitality consumer behavior. A comprehensive review of hospitality discount programs, discussion of the methodological approach, and potential extensions of the technique is provided, along with applications to hypothetical restaurant and casino discount programs. We show changes from complex consumer behavior that are difficult to directly measure or forecast with traditional methods. One simulation outlines a scenario in which the profitability of restaurant discount programs can easily be misinterpreted leading to poor management decisions, while the other simulation reveals a scenario where casino house advantages could vary substantially from those typically used in profitability calculations. Copyright © Taylor & Francis Group, LLC.