Hotel Overbooking: An important operations decision for service businesses such as hotels, airlines, and care

rental companies is the number of reservations to accept to effectively fill capacity knowing that some customers

may not use their reservations. If a hotel, for example, holds rooms for customers who do not show up$,$ they lose

revenue opportunities. Even if they charge a nights lodging as a guarantee, rooms held for additional days may

go unused. A common practice in these industries is to overbook reservations.

The logic of the model is straightforward. The decision variable is the number of reservations to accept. The

hotel cannot accept more reservations than its predetermined limit$.$ If the actual number of customer arrivals

exceeds the room capacity, overbooking occurs. A manager would probably want to use this model to analyze

how the number of overbooked customers and net revenue would be influenced by changes in the reservation limit$,$

customer demand, and cancellations.