View article

M hotel rooms are available at a date n periods from now. Reservations are made by customers for that date, which is at the peak of the high season. Typically, for such a time period, a policy of overbooking is exercised by the hotel management. Customers, however, may cancel their previously confirmed reservations at any time prior to their arrival, with no penalty. On the other hand, new requests for rooms for that particular date are generated anew. At the end of each period the hotel management reviews both the “inventory” level of remaining uncanceled (previously confirmed) reservations and the total number of not-yet-confirmed new requests. At that time a decision is made regarding the inventory level of confirmed reservations with which to start the next period. A decision is one of three actions: (i) to keep the inventory at its present level (i.e., declining all new requests); (ii) to increase the level of …