Booking horizon forecasting with dynamic updating: A case study of hotel reservation data

This work aims to forecast the accumulated booking curve, as well as the number of reservations expected for each day in the booking horizon, using singular value decomposition to the historical booking profiles to reduce the dimensionality of this problem.

Abstract

A highly accurate demand forecast is fundamental to the success of every revenue management model. As is often required in both practice and theory, we aim to forecast the accumulated booking curve, as well as the number of reservations expected for each day in the booking horizon. To reduce the dimensionality of this problem, we apply singular value decomposition to the historical booking profiles. The forecast of the remaining part of the booking horizon is dynamically adjusted to the earlier observations using the penalized least squares and historical proportion methods. Our proposed updating procedure considers the correlation and dynamics of bookings both within the booking horizon and between successive product instances. The approach is tested on real hotel reservation data and shows a significant improvement in forecast accuracy. © 2011 International Institute of Forecasters.