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

Abstract

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.