Game Theory and Managing Change In Hotels

By Pierre Boettner - founder and CEO, hospitality pulse

11 April 2017
  • Game Theory and Managing Change In Hotels


Perhaps it was the surreal location that inspired it, but last week as we introduced pulseLink at the Atlantis resort in Dubai, I had a moment of clarity about how hotels change processes. As we watched the staff navigate the nascent stages of using a new tool—a tool that will make them more efficient and effective at their jobs—I noticed their resistance. Some staff wanted to go around the new system, straight to the PMS. I've seen this desire to bypass a new tool or system before, and not just with room allocation. It happens with plenty of systems that engage with the PMS. As I observed this typical behavior, I thought of Nash Equilibrium.

Nash equilibrium is part of an abstract game theory developed by economist John Forbes Nash. Nash, who received the Nobel Prize in 1994 for his pioneering work on game theory, reached popular fame for his lifelong struggle with schizophrenia, depicted in the critically acclaimed movie A Beautiful Mind. Nash theorized that when equilibrium is reached it means that no one person can achieve a higher payoff by deviating strategy. I like the following example of rush hour traffic.

There are two main arteries that connect Point A and Point B. Outside rush hour it takes 20 minutes to get from A to B. During rush hour it takes 90 minutes. To alleviate rush hour traffic, the state builds a new highway with the capacity of both existing arteries combined. With the new road in place, the state expects that rush-hour traffic from A to B will be reduced to 45 minutes.

The new highway opens, everyone gets on it, and rush-hour traffic takes 2 hours. For weeks, it seems the highway is a failure, and the public proclaims the government is inefficient and ineffective. Months later, however, it takes 45 minutes to get from point A to point B, but no one notices the shift.

What happened? The optimal solution is for traffic to distribute itself across all available options. When there were just two arteries, all drivers had their preferred highway, but when there was a new highway, everyone migrated to it. Then they got frustrated, and everyone went back to their old preference, yielding the same results. Even more frustrating, they start testing a different road every day, at times clogging it beyond relief.

After several months of trying different highways, the drivers settle into new habitual paths. They choose one of the three roads knowing they are all equally bad at times. When commuters pick one road, traffic settles into a pattern where all navigation options result in approximately the same travel time. No one can gain from switching strategies at this point: Nash equilibrium.

What does this have to do with hotels? Agents steal each other's rooms all the time in the PMS because it shows all rooms to everyone. Multiple agents pick the same room. The only one who ultimately gets it is the first to click the check-in button on the screen.

Then we come along to introduce pulseLink, a solution that should alleviate this problem immediately and improve the way rooms are allocated. However, there is a forbidden bypass, the PMS.

Let's say there are four check-ins for two rooms. The inevitable outcome is that two guests must be queued. Agents 1 and 2 are first to click pulseLink. The room is reserved for 90 seconds. Agents 3 and 4 are instructed to queue the guests. Instead, however, Agents 3 and 4 use the forbidden path—going straight to the PMS. The outcome is exactly the same: two guests get rooms, two guests are queued, and everyone is frustrated with the result. Agents 1 and 2 complain that pulseLink doesn't work because it offers rooms that they can't use to check in the guest. Agents 3 and 4 claim pulseLink doesn't work because it doesn't offer a room that they can clearly see in the PMS.

The possible outcomes are:

1). That they all discontinue using pulseLink and revert to old processes, or

2). They continue using pulseLink until they realize that the biggest benefit is when they all get on board with the tool and quit using the forbidden PMS path, regardless of what it shows.

I see this problem in hotels a lot. Hotels invest money and time in a tool to improve processes. However, there are problems. Some people believe that they benefit if they don't use the tool or if they go around it, and because of this, those who adopted it think it doesn't work. And you have disgruntled people, and your processes have actually gotten worse, at least until everyone adopts. As my team worked with the staff at the Atlantis, I realized our job is to encourage adoption and build confidence among the front office staff, as much as it is to teach them how to use it.

Maybe it's human nature to want to go around the new process in the (perceived) interest of personal gain. Can we go straight to a new, more efficient process without staff staying stuck in old patterns? I don't know, but maybe Nash equilibrium can offer a format for explaining that it benefits everyone when a new process is uniformly adopted. At the very least, it gives executives and managers an understanding of why the process seems to get worse before it gets better and can help navigate the resistance with more equanimity.

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hospitalityPulse, Inc.

303 Potrero Street, #43-108
Santa Cruz, CA 95060
United States
Phone: 831.295.6650

Pierre Boettner

Pierre Boettner spent his entire life between hotel operations and hospitality technology. In 1993 he pioneered an industry-first forecasting and pricing tool for Mövenpick Hotels and was later involved in many system innovations, helping hoteliers improve their distribution capabilities. Recognizing the increasing difficulty of managing rooms operations, he and long-time colleague Denis Bajet founded hospitalityPulse in 2013. This company has dedicated itself to solving the most complex operations tasks still requiring daily human intervention. Pierre Boettner is a graduate of the esteemed Ecole hôtelière de Lausanne.

Pierre Boettner