Unit 5: Inventory Management
- inventory management
- inventory management techniques
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2.1 Reduce arrival and duration uncertainty
2.2 Overbooking
2.3 Restrictions to manage the inventory
Unconstrained demand 
Inventory in a hotel is al the rooms that you have and is determined by Room types and # of rooms
The more you differentiate the more segments
Importance:
Factors affecting our control of inventory
After deciding the different rates if the hotel you need to decide how these rates are made available
Is the art of optimizing the inventory of your hotel depending on the demand. In other words, it is deciding what we put in the shelf to be sold
Not guaranteed bookings
Late check-outs
Early departures
Out of order
System synchronization
Cancellations and no-shows
Understand where they are coming from (room types, country of residence, visa permits, channel, special events)
Revise your cancellation policy (design a policy that does not only protect your customers but also your hotel).
Require card deposits
Offer disconte non-refundable bookings
Interact with the customer
Closed (C)
Selling more rooms than availability is a useful practices to guarantee 100% occ.
You need to protect from cancellations, no-shows and early departures
Too many overbookings mean some customers need to be walked out
Too few overbooking means opportunity cost of having empty rooms
More overbookings than No-show = walk out customers
No-shows = Overbookings = we're cool
Less # of No-shows than overbookings = opportunity cost of having an empty room = ADR
Show rate
Can be computed by dividing the # of rooms that are actually occupied X the # of booked rooms
same or lower than ≤ 1
Assume that using historical data you have estimated that the show rate of you hotel equals 0.95 thats 95%
This means that all of the reservations on the books only 95% of them arrived to the hotel on average
Deterministic heuristic rule
simple overbooking rule that consists of computing the booking limit by simply dividing you hotel's capacity by the historical rate
E.G. if your hotel has 120 rooms and your show rate equals 0.95 you should overbook 6 rooms (120/0.95=126.32)
SHOW RATE= # OF ACTUALLY OCCUPIED ROOMS/ # OF BOOKED ROOMS
Two main overbooking models
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- deterministc heuristic
- Risk-based model 30%
- Service-level model 4% the GM decides
- Hybrid policy 1%
- other methods 4%
Marginal terms: marginal revenue, the extra revenue you obtain by the overbooking, you need to arrive to an optimal point (marginal rev meets marginal cost)
first compute the marginaL revenue of overbooking a room (MR)
The hotel does not receive any revenue from the unoccupied rooms, nor form walking guests to other hotels due to overbookings. Thus, its marginal revenue are null
MARGINAL REVENUE = 0
𝑇𝐶 = 𝑃𝑟𝑜𝑏 𝑛𝑠 < 𝑜𝑟 ∗ 𝑜𝑟 − 𝑛𝑠 ∗ 𝑐𝑤 + 𝑃𝑟𝑜𝑏 𝑜𝑟 < 𝑛𝑠 ∗ (𝑛𝑠 − 𝑜𝑟) ∗ 𝑐𝑒
The ns is the # no.shows, or is the # overbooked rooms Cw is the cost of walking a guest to another hotel and Ce is the opportunity cost of having an empty room
Closed to arrival (CTA)
Closed to departure (CTD)
Minimum length of stay (MinLOS)
Maximum length of stay (MaxLOS)
A reservation cannot be accepted to arrive on or stay through a closed date.
This means that even if someone want to arrive on sunday and stay for 4 nights, which is great piece of business, we would say NO.
A resrvation cannot be accepted to arrive on a given date.
This means that a guest cannot book to arrive on monday, yet the guest can arrive on sunday and stay through monday.
A reservation cannot be accepted to depart on a given date "D"
This means that a guest cannot depart on wednesday, yet a guest can arrive on wednesday
A reservation can only be accepted if it lasts a minimum of specified days. This restriction is specific to the day of arrival
A guest can arrive on sunday and stay either 1,2,3,4,.. nights
A guest can arrive on wednesday and stay a min of 2 nights.
A guest can arrive on thursday and stay a min of 1 night.
A reservation can only be accepted if it lasts less than a specified # of days. This restriction is used to limit the availability of promotional rates
A guest can arrive on tuesday and stay either 1,2,3,4,.. night
A guest can arrive on wednesday and stay a max of 2 nights
A guest can arrive on thursday and stay a maximum of 1 night