Marriott Rooms Forecasting Case Study
This case involves the study of the Hamilton Hotel and the use of forecasting to help predict their demand on a specific day. Marriott Hotels operated the Hamilton hotel. Marriott has been known for a culture that puts people first. Marriott is recognized worldwide for their enduring values, their spirit to serve, and their corporate commitment to creating better places to live and work.
1) Critical Issue:
The critical issue is the manager has to choose either to accept up to 60 additional room reservations for Saturday or not.
2) Critical Facts:
The hotel loses revenue if the room is vacant for one night. Customer service is a priority for Marriot’s hotel.
Customers often cancel reservations in the last minute or they don’t show up. Sometimes, customers stay in the hotel for an additional date beyond their original reservation. Sometimes, customers checked out early. Every Tuesday, the manager needs to prepare a forecast for the follow week occupancy for each day from Saturday to Friday. If the hotel meets targets for occupancy and revenue, hotel managers will be reward for their performance. The hotel has 1877 rooms. On Tuesday, August 18, 1987 the manager received a reservation request for up to 60 rooms from a tour company for Saturday August 22. Although 1839 rooms were reserved already for Saturday. The contribution margin from a room was about $90.
The cost for denial a room would be about twice the contribution figure. Frequent guests are the customers that stay more than 45 nights a year in the hotel.
In order to forecast the expected demand in the short term and make the right decision for Snow either to accept up to 60 rooms, first we decided to look at the historical daily demand for the last 13 weeks and analyze the demand pattern. In graph 1, given data shows peaks and valleys, has no trend and shows seasonal variations in time series. It is difficult to forecast an accurate future demand for this data without using the seasonal forecasting method.
When analyzing Pickup Ratio (Demand/Tuesday Bookings) for each Saturday, we can see that most ratios are less than 1.00. There were only two Saturdays where the pick up ratio greater than 1.00. See table 1. These were both on American holidays, D-Day and Independence Day. With this information we expect the pick up ratio will be about 95%-99%. The lower limit is the average of all the ratios and the upper limit is to not exceed 1.0That tells us that based on the historical demand, on average; more rooms are canceled than booked since Tuesday, which give us a confidence to overbook.
Average of the 13 weeks
1* The U.S. Army remembers June 6, 1944: The World War II D-Day invasion of Normandy, France.
2* Independence Day
Marriott belongs to a hospitality industry and it is important to realize how the hotel industry operates from the prospective of revenue management and meets targets for occupancy and revenue performance. If reservation manager, Snow, decides to accept 60 rooms reservation from the tour company, she will overbook 22 rooms. As we know, 1839 rooms have been already reserved and she can give only 38 additional rooms. If she accepts 60 rooms reservation and there are no...
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