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Lecture 10

HTM 4454 Lecture 10: LO8 - Inventory Management

Hospitality and Tourism Management
Course Code
HTM 4454

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HTM 4454
LO8: Inventory Management
1. Forecasting Cancellations and No Shows
a. Based on historical data, adjusted for current and future events, we’ve
created a forecast of the number of rooms demanded at each rate
b. Next question – how many reservations should we accept in each
c. (Number of Reservations – Cancellations – No Shows) = Materialized
2. Managing Cancellations and No Shows
a. Try to reduce the problem
a.i. Guaranteed reservations
a.ii. Refund policies/ Cancellation time windows
a.ii.1. Time windows prevent rate cannibalization via
a.ii.2. These windows can be altered during peak
seasons, etc.
a.iii. Working with Groups (booking windows/ anticipated wash
rooms [rooms that go back into available rooms)
b. Materialization Rates – forecasting amount of no shows and
c. Overbooking Decisions
c.i. How aggressive?
c.i.1. Sensitivity analysis
c.i.1.a. What is the potential cost of being wrong?
c.i.1.a.i. If you’re wrong, how hard is it going to be
to fix?
c.ii. Dealing with overbooking error
c.ii.1. Flex Capacity – Reserved rooms for employees,
c.ii.2. “Walking Guests”
c.ii.2.a. Arrange Transportation
c.ii.2.b. Pay for their lodging elsewhere
c.ii.2.c. Where do you walk guests?
c.ii.2.c.i. Same Scale
c.ii.2.c.ii. Better Property
c.ii.2.c.ii.1. Actually likely to come back
to you because it is out of their
price range
c.ii.2.c.ii.2. Walking them to a similar
property gives them a realistic,
alternative property
c.ii.3. Compensation
c.ii.3.a. Future service coupons – “funny” money
c.iii. Protect Key Customers
c.iii.1. High Value Clients SHOULDN’T get walked
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