Forecasting uncertain hotel room demand

Abstract

Economic systems are characterized by uncertainty in their dynamics. This increasing uncertainty is likely to promote bad decisions that can be costly in financial terms. This makes forecasting of uncertain economic variables an instrumental activity in any organization. This paper takes the hotel industry as a practical application of forecasting using the Holt–Winters method. The problem is to forecast the uncertain demand for rooms at a hotel for each arrival day. Forecasting is part of the hotel revenue management system, whose objective is to maximize revenue by making decisions regarding when to make rooms available for customers and at what price. The forecast approach discussed in this paper is based on quantitative models and does not incorporate management expertise. Actual data from a hotel are used to illustrate the forecasting mechanism.