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Marriot Room Forecasting: Operations Management Case

The document discusses forecasting room demand at a hotel over a period of 14 weeks using exponential smoothing and regression analysis. It analyzes whether the hotel can accommodate an additional booking request for 60 rooms from a tour company based on historical demand trends. The forecasted demand is estimated to be 1732 using exponential smoothing with an alpha value of 0.4, indicating there is enough capacity. It is recommended the hotel accepts the tour company's request.

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Saranya Vs
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206 views4 pages

Marriot Room Forecasting: Operations Management Case

The document discusses forecasting room demand at a hotel over a period of 14 weeks using exponential smoothing and regression analysis. It analyzes whether the hotel can accommodate an additional booking request for 60 rooms from a tour company based on historical demand trends. The forecasted demand is estimated to be 1732 using exponential smoothing with an alpha value of 0.4, indicating there is enough capacity. It is recommended the hotel accepts the tour company's request.

Uploaded by

Saranya Vs
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MARRIOT ROOM

FORECASTING
OPERATIONS MANAGEMENT CASE

LAKSHMI PRIYA PILLAI - 1601142

SANTHOSH S – 1601179

NITHISH D – 1601148

VIGNESHWARI C – 1601180

ANMOL UPADHYAY – 1601182

SUHAS PRATIK VATS - 1601166


MARRIOT ROOMS FORECASTING
The problem under consideration is to check if Hamilton Hotel can accommodate 60 more people
based on the usual trends of bookings and demand that Hotel Hamilton has recorded for a period of
14 weeks. It can be seen that having a room vacant has opportunity costs and a denied room in hotel
Hamilton has a higher cost attached to it. Snow thinks that it should be valued at a cost which is twice
the contribution margin (=2*90=$180). Current bookings for Saturday are 1839 where the total
capacity of the hotel is 1877. The estimated actual demand has been calculated using the following
ways:

1. Using exponential smoothening method:

The demand forecast for Saturdays are carried out after omitting other days of the week because the
demand is highly dependent on the day of the week with Tuesday, Wednesday and Thursday having
more demand than the other days of the week. This method includes the effects of season as seasonal
increase or decrease in bookings don’t happen suddenly in a week. This however doesn’t take into
effect the events that might be happening in the vicinity of the hotel that could be affecting the
demand for the hotel rooms adversely for one or two days.

Since, the exponential smoothening method requires forecasted demand for one week to calculate
the demand for the remaining weeks. The forecasted demand for week 2 is assumed to be equal to
the actual demand in week 1.

The graph obtained for different values of smoothening factor ‘α’ is shown below.

demand forecasting using exponential smoothening


2,500

2,000

1,500

1,000

500

0
0 2 4 6 8 10 12 14 16

Actual demand alpha=0.2 alpha=0.4 alpha=0.6 alpha=0.8 alpha=1

The forecasted demand is estimated to be the highest when the value of alpha=0.4 and has a value of
1732. This shows that out of the bookings made it is most probable for 1732 people to actually turn
up which provides enough rooms for the tour company which has a higher probability of filing up the
rooms as compared to individually booked rooms.
From the analysis using exponential smoothening curve it makes perfect sense to accept the offer that
has been proposed by the tour company.

2. Regression analysis of adjusted pickup ratio:

To compensate for the difference in the pickup ratio across days in the week which arises as a result
of differing customer behaviour and requirements on different days of the week. Adjusted pickup
ratio is calculated when actual pickup ratio is divided by the day of the week index to compensate for
the changes in the change in demand across weeks. The regression analysis is carried out in this
adjusted pickup ratio and the regression equation is found to be

Adjusted pickup ratio = 1.155798 - 0.00118*day

The day value of Saturday (August 22,1987) corresponding to the problem is 92.

Adjusted pickup ratio for August 22,1987 = 1.047238

Actual pickup ratio = Adjusted pickup ratio * DOW index value = 1.047238*0.865 = 0.9059

Demand = bookings*pickup ratio = 1839*0.9059 =1666, which leaves us with 211 rooms out of which
60 rooms can be provided to the tour company.

Other possibilities:

All the people who have booked turn up after allotting 60 rooms for the tour company: The hotel is
now under a scarity of 22 rooms, therefore additional cost spent on these 22 bookings would be
$3960.00. This can be achieved by providing rooms in Hamilton for those with Marquis cards and
accommodating other bookings elsewhere.

Snow does not allocate any rooms for the tour company but all the other bookings are picked up:
The hotel would now have 38 rooms vacant, the opportunity cost is the contribution margin of these
rooms of these were booked. Therefore, the net opportunity cost is $3420.00.

Snow allocates only the remaining 38 rooms for the tour company and all bookings are picked up:
The opportunity cost of this decision is zero, as all the rooms are currently occupied and there are no
extra cost in accommodating extra bookings elsewhere.

Conclusion
The forecasting done taking the historical data of bookings and actual demand into consideration
shows that the 60 bookings that are proposed by the tour company can easily be accommodated.
There is very little chance for all bookings to show up and even if they do the opportunity cost is almost
equal to the opportunity cost of completely rejecting the offer. The estimated demand calculated is
1666, according to the method that is most likely to be carried out by Snow. Therefore, it is
recommended that Snow accepts the offer provided by the tour company and accept to provide them
with 60 rooms.
The regression analysis report of the adjusted pick ratio:

Table: Exponential smoothening forecasting:

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