RoomTetris: an optimal procedure for committing rooms to reservations in hotels

Abstract

Purpose Many hotels allocate guests to specific rooms immediately after reservation. This happens because individual rooms are sold (and there is no concept of room type) or because the assignment is done by hand at reservation or because of a connection with a channel manager, which is immediately fixing the room number after a reservation request. This early allocation is suboptimal, and it causes the unnecessary rejection of some reservations when the hotel has a high occupancy level. The purpose of this paper is to investigate different room allocation algorithms, including an optimal one (called RoomTetris), aiming at higher occupancy levels and profitability. Design/methodology/approach The methodology is based on theoretical results and experimentation. The optimality or the proposed RoomTetris algorithm is demonstrated. Experiments are executed in different contexts, including realistic ones, through the adoption of a hotel simulator, to measure the improvements in the occupancy rate of the optimal and heuristic strategies with respect to random or sub-optimal assignments of rooms. Findings The main results are that smart allocation algorithms can greatly reduce the rejection rate (reservation requests which cannot be fit into the hotel room plan) and improve the occupancy level, the percentage of available rooms or beds sold for the various periods. Research limitations/implications This analysis can be extended by considering cancellations and overbookings. A second possibility to add flexibility in room allocation for hotels having more than one type of rooms is that the hotel can upgrade and offer a high-price room to the customer, which given an even large flexibility to fix rooms by shifting customers to other compatible types. In addition, more complex integrations with revenue management can also be considered, for cases in which the cost of a room depends on the number of guests. Practical implications Given that the difference in occupancy rate of the optimal algorithm is particularly large in high season and high-request periods, periods which are usually associated to higher rates and higher volumes, the proposed algorithm will improve the main financial performance indicators such as revenue per available room by an even bigger multiplier, depending on the hotel pricing policy. Because the room allocation process can be completely automated, the adoption of appropriate smart allocation algorithms represents a low-hanging fruit to be picked by efficient hotel managers. Originality/value To the best of the knowledge this is the first proposal of an optimal algorithm (with proof of optimality) for the considered problem.