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Vol. 9, No. 3, May 2009, pp. 158159

issn 1532-0545
09
0903
0158

informs

doi 10.1287/ited.1090.0031ca
2009 INFORMS

I N F O R M S
Transactions on Education

Case Article

Revenue Management at Harrahs

Entertainment, Inc.
Narendra Agrawal

Department of Operations and Management Information Systems, Leavey School of Business,

Santa Clara University, Santa Clara, California 95053, nagrawal@scu.edu

Morris A. Cohen, Noah Gans

Operations and Information Management Department, The Wharton School, University of Pennsylvania,
Philadelphia, Pennsylvania 19104 {cohen@wharton.upenn.edu, gans@wharton.upenn.edu}

arrahs Entertainment operates a highly diversied network of gambling facilities in the United States and
the United Kingdom. This case introduces students to Harrahs use of price controls for hotel revenue
management: how it works, how it integrates with Harrahs Total Rewards loyalty card, and how it might be
changed. Within the context of a course on revenue management or service operations, the case can be used
effectively to discuss principles of revenue management and to demonstrate the use of a number of quantitative
analysis techniques to design and optimize revenue management systems.
Key words: revenue management; gaming industry; clearing prices; bid prices; hotels
History: Received: May 2008; accepted: January 2009. This paper was with the authors 5 months for 1 revision.

Case Background

Overbooking
Integrating bid prices, booking limits, and overbooking in a network
Within this RM segment, we have used the case
in two ways: as an initial session that immediately
immerses students into the details of RM (prior to
learning any of the standard RM models listed above)
and as a nal capstone class in which students apply
many of the models to the case. We believe that the
case is rich enough to be used twice at both the start
and the end of such an RM segment.
Used in an introductory session, the Harrahs case
provides students with a background on hotel RM
in the gaming industry, an area that is lesser-known
than more traditional hotel and airline applications.
In this context, we have used the case qualitatively,
without requiring a detailed analysis or case write-up.
Even without explicit quantitative analysis of Harrahs
pricing scheme, the case provides enough detail to
stimulate classroom discussion concerning the aims
of Harrahs pricing scheme and whether or not it
best serves the companys economic goals for its RM
system.
Used as a quantitative case later within an RM
segment, Harrahs allows the class to work through
some or all of the following: (1) understand Harrahs

This case focuses on Harrahs Entertainments use of

price controls for hotel revenue management: how it
works, how it integrates with Harrahs Total Rewards
loyalty card, and how it might be changed. To write
the case, we rst conducted an extensive set of interviews with senior executives at Harrahs. To construct
the case example, we worked with Harrahs executives, and IT staff to acquire data from their revenue
management system. To reduce the size of the example to more manageable proportions, as well as to
disguise some of the condential features of the data,
we scaled and consolidated the raw data.

Experience in Teaching the Case

At The Wharton School and Santa Clara University,

current undergraduate and the MBA versions of a service operations elective course have three to ve class
sessions devoted to revenue management (RM). Typically, the topics covered in this segment include the
following.
Introduction to RM fundamentals
Network effects and bid-price linear programming formulations
Expected Marginal Seat Revenue (EMSR) booking limits
158

Agrawal, Cohen, and Gans: Case Article: Revenue Management at Harrahs Entertainment, Inc.

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INFORMS Transactions on Education 9(3), pp. 158159, 2009 INFORMS

simple clearing price mechanism for hotel-room

control; (2) formulate and solve a linear program
whose shadow prices can be used to account for
multiple-night stays; (3) compare the performance of
the two pricing schemes using Monte Carlo simulation; and (4) use the simulation results to motivate the
additional benet that can be derived by using EMSRstyle booking limits.
When used as a quantitative case, we assign students a case write-up. The specic exercise assigned
naturally depends upon the previous experience students have had with techniques such as linear programming and simulation. If students have not been
exposed to linear programming in prior classes, they
can be encouraged to develop heuristics to determine
room allocation. Similarly, if students have not been
exposed to simulation, this section can be skipped,
or, it can be used to introduce students to the use of
simulation as a powerful tool in this context.
We also encourage students to visit Harrahs website (www.harrahs.com) prior to the class. The website
provides a nice overview of the Total Rewards loyalty

159

program. Students should also be encouraged to visit

the websites of MGM Grand (www.mgmgrand.com)
and Bellagio (www.bellagio.com) to develop an appreciation of how Harrahs competitive strategy differs
from their competition.
Thus far the case has worked quite well for us. The
quality of the case write-ups handed in has shown
us that the case is a good vehicle for having students apply RM models and think in a real-world
context. From the high level of engagement the students display during in-class discussion, as well as the
positive responses we receive in end-of-course questionnaires, we have concluded that students also nd
the case to be interesting. In addition to The Wharton
School and Santa Clara University, the case is currently being used in MBA programs at the Indian
School of Business (Hyderabad), Columbia Business
School, and INSEAD. However, we do not have feedback regarding their experience with this case yet.
Instructors considering this case can access a teaching note and Excel spreadsheets that contain the case
data and solution from the ITE website at http://ite.
pubs.informs.org/.