Hotel room allocation with multiple sales channels: a perspective of minimax regret

ABSTRACT

We consider a room allocation problem for a hotel providing room reservation service through multiple channels. Traditional room allocation models usually assume hotels can forecast the characteristics of demand function and/or arrival process to some extent. But in practice, such a restrictive assumption is possibly unrealistic, and thus the corresponding risk-neutral approaches are debatable. The main contribution of this paper is that we formulate the hotel’s room allocation problem without any assumption on demand from the perspective of minimax regret and derive an adaptive nested limits strategy which allows higher profitable channels having access to all rooms reserved for lower profitable channels. Our results show that customers arrive in a low-before-high manner in the worst-case scenarios. On this basis, we further prove the lower bound of maximum regret for any strategy and develop an optimal strategy matching the lower bound. Comparison with other common strategies is also discussed.

KEYWORDS:

• Room allocation
• minimax regret
• worst-case analysis
• nested strategy

Acknowledgements

The authors would like to thank the two anonymous referees for their helpful comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by National Natural Science Foundation of China [grant number 71501045], [grant number 71701048]; Natural Science Foundation of Fujian Province [grant number 2016J01332]; Program for New Century Excellent Talents in Fujian Province University; and Special Foundation for Science and Technology Innovation of Fujian Agriculture and Forestry University.

Notes on contributors

Guanqun Ni

Guanqun Ni is an associate professor at College of Management & College of Tourism at Fujian Agriculture and Forestry University. He completed his Ph.D. in Management Science and Engineering at Xi’an Jiaotong University in China in 2012 and worked as a postdoctoral researcher at Sichuan University from November 2012 to December 2014. He has been a visiting scholar at Department of Computing Science at University of Alberta. His research interests include revenue management, operations management, approximation algorithms and combination optimisation.

Xin Feng

Xin Feng is a lecturer at College of Management & College of Tourism at Fujian Agriculture and Forestry University. He completed his Ph.D. in Management Science and Engineering at Xi’an Jiaotong University in China in 2016. His research interests include operations management, logistics management and online algorithms.

Lei Chen

Lei Chen is a teaching secretary at College of Management & College of Tourism at Fujian Agriculture and Forestry University. She completed her B.S. in Finance Management at Sichuan University in China in 2012.